Financial News

[Balta1701]

And the articles you see from bankers and realtors state that the shadow inventory has been diminishing - that they are processing more and more of them. This is good in the long term, now that they are accelerating their pace, but not putting them all out in a huge wave.

The shadow inventory of foreclosures should peak in the summer of 2010 before falling gradually in the later months, according to a new report from Barclays Capital.

 

Barclays defines the shadow inventory of foreclosures as loans in 90-plus day delinquency or already in the foreclosure process. According to the report, there are currently 2.4m loans in 90-plus day delinquency and another 2.1m in foreclosure, totaling 4.5m in the shadow inventory.

Link

[mr_genius]

Not at all. The surge in buying that started last fall probably wouldn't have been nearly as big had the government not dumped in truckloads of cash.

 

Not that it was the most effective method of stimulus, but when the government ponies up $20 billion or so, it's going to have an effect.

 

but also keep in mind that it pushes down demand for months post government stimulus. it's not an effective, as you mentioned, or sustainable solution.

[Balta1701]

but also keep in mind that it pushes down demand for months post government stimulus. it's not an effective, as you mentioned, or sustainable solution.

I totally agree and I didn't like the tax credit as effective stimulus, but I won't deny that it had a measurable impact.

[mr_genius]

There are also a lot of people who are going to run out of unemployment. I am talking about the long term unemployed who really are going to be hard pressed to find a job anywhere near the levels of income they had before. I would suspect the extended unemployment insurance program has also kept foreclosure rates down. This will, likely, also add to the foreclosure rate in the near future. Thus putting more existing homes on the market and lower prices. Additional supply with a fairly weak demand.

[Balta1701]

There are also a lot of people who are going to run out of unemployment. I am talking about the long term unemployed who really are going to be hard pressed to find a job anywhere near the levels of income they had before. I would suspect the extended unemployment insurance program has also kept foreclosure rates down. This will, likely, also add to the foreclosure rate in the near future. Thus putting more existing homes on the market and lower prices. Additional supply with a fairly weak demand.

Of course, extending unemployment insurance at a time of extremely high long-term unemployment is usually argued to be an extremely effective method of stimulus per dollar...

[mr_genius]

Of course, extending unemployment insurance at a time of extremely high long-term unemployment is usually argued to be an extremely effective method of stimulus per dollar...

 

the question comes down to: "when do these extended benefits actually run out?". Obviously an infinite amount of time is not reasonable. The problem is, there is a high probability that the jobs lost are not coming back and will not be replaced with new jobs any time soon.

 

[Rex Kickass]

the question comes down to: "when do these extended benefits actually run out?". Obviously an infinite amount of time is not reasonable. The problem is, there is a high probability that the jobs lost are not coming back and will not be replaced with new jobs any time soon.

 

Extended benefits get phased downward when the job market tends to do better. The problem is that there are over 1 million people who have already lost or are about to lose benefits after 99 weeks of active job searching. Our job market fell so far, so fast that a lot of these people are long term unemployed, but not necessarily giving up. The market has just been that bad for that long.

[Chisoxfn]

Foreclosures SELLING is good, so is the fact that we appear to be around the top or just past of the big foreclosure bubble. The dip in general is bad. But the marketplace does appear to be shedding inventory in a healthy way, yes. It will be quite a while before we see is truly be strong though, another couple years at least. But this huge second drop in prices and sales that people have been predicting for a while doesn't seem to be in the cards. I'd bet 2010 ends up an overall wash, with the market staying more or less stagnant for the year. 2011 should see some improvement.

Quite frankly we aren't even close yet. There is still a huge shadow inventory of foreclosures out there and it is taking a long time for everything to unwind. We had some nice bilps and the economy seems to be improving, but the housing market is taking much much longer to unwind than I think anyone thought. Not only was the drop worse than people expected, the length of decline seems to be much larger as there still might be room for prices to drop more.

 

Rates also are at an all time low today. When you have low prices and low rates and you still aren't seeing much increase in demand, you have issues. Some of those issues are related to the ability for people to gain capital and the overall fear of the economy and to take on significant debt in these uncertain times, some of it quite frankly has to do that some of the largest real estate markets in the US still are priced too high from an affordability standpoint.

[Chisoxfn]

there are more of those to come too.

And there are a ton of homes that haven't even went into the foreclosure process due to the backlog. Even though foreclosures are dropping there is about 1 to 2 years worth of homes sitting in the backlog right now, which is pretty scary when you think about it. The key is the economy should be recovering by that point and it should be easier to get those homes sold 2 years from now than it is today, but who knows.

 

That shadow inventory will still keep prices down and will potentially allow for a bit more of a price decrease in the market. I'm antsy to jump in on a new home if I can find something I like, but am not in any hurry because I don't expect myself to miss out on anything major.

 

One thing about Real Estate is that it tends to move slow and it would appear it also corrects very slow.

[NorthSideSox72]

There are also a lot of people who are going to run out of unemployment. I am talking about the long term unemployed who really are going to be hard pressed to find a job anywhere near the levels of income they had before. I would suspect the extended unemployment insurance program has also kept foreclosure rates down. This will, likely, also add to the foreclosure rate in the near future. Thus putting more existing homes on the market and lower prices. Additional supply with a fairly weak demand.

That's actually what scares me - the jobs picture. We've cleared out a lot of the people who got into stupid mortgages, and the reset rates are so low that many of those people are actually seeing lower payments. The issue is so many people out of work or losing jobs still, people going into foreclosure as a result is (IMO) the biggest concern. The shadow inventory is peaking or past peak as you pointed out, but I'm afraid if the job market doesn't continue to improve (as it was until very recently), and we start losing jobs overall again, then more foreclosures will follow, and that WILL cause significant price drops.

 

But if the economy can go back to the slow and steady improvement in the jobs picture as it was for most of the year, I think we'll steer clear of that problem.

 

[NorthSideSox72]

A little anecdotal addition to this disussion..

 

A few doors down from us, back in 2008, someone bought a single city lot (in a slot between Bucktown and Lincoln Park), with an existing but dilapidated 2-flat, for $580k. He took out a total loan of $1.1M for the property and cost to build. Asked for a zoning variance to go 3 units, was denied due to neighborhood resistance, and decided to build a single family home. Needless to say, things didn't go well - I don't see what single family home you can build on a single lot in our neighborhood that would net you above $1.1M. The building went up, framed, but the guy lost the building in foreclosure before anything other than the frame could be finished. So there was this partially built structure just sitting there for 2 years.

 

Bank just sold the property for... wait for it... $180,000. It listed at that price from the bank, and was under contract within a week (hell, the land is worth twice that, even with the big price drops). Someone, long run, got a steal there.

 

Hopefully we won't have a derelict building there for long.

 

[Balta1701]

We had some nice bilps and the economy seems to be improving, but the housing market is taking much much longer to unwind than I think anyone thought.

Haven't I been saying that would be the case? Thought I had been.

[NorthSideSox72]

Haven't I been saying that would be the case? Thought I had been.

I don't know, it seems to me its done what most of the experts said it would - a long, slow process.

 

[lostfan]

There are no more dominoes to fall after prime mortgages, it just takes years for everything to work itself out.

[Balta1701]

There are no more dominoes to fall after prime mortgages, it just takes years for everything to work itself out.

Depends on if you count Europe or China as dominoes.

[Jenksismyhero]

Apparently the sweeping financial legislation is nearing completion. This makes me extremely confident that it will be a success:

 

"No one will know until this is actually in place how it works." Sen. Dodd.

 

http://www.washingtonpost.com/wp-dyn/conte...2500675_pf.html

 

[StrangeSox]

I'm pretty sure you're taking that out of context.

[Jenksismyhero]

I'm pretty sure you're taking that out of context.

 

God I wish I were, but I'm not. Read the article.

 

"It's a great moment. I'm proud to have been here," said a teary-eyed Sen. Christopher J. Dodd (D-Conn.), who as chairman of the Senate Banking Committee led the effort in the Senate. "No one will know until this is actually in place how it works. But we believe we've done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done."

Edited June 25, 2010 by Jenksismybitch

[Balta1701]

I'm pretty sure you're taking that out of context.

Sadly he's right though. It should make things better, but it went through the Senatorial wringer, which means that there's likely loopholes in there that we haven't even dreamed of yet.

[StrangeSox]

God I wish I were, but I'm not. Read the article.

 

I believe he's talking about efficacy of their regulations, ie how well it will work, not that nobody understands the bill they wrote.

[HuskyCaucasian]

I believe he's talking about efficacy of their regulations, ie how well it will work, not that nobody understands the bill they wrote.

that was my thought as well.

[NorthSideSox72]

I believe he's talking about efficacy of their regulations, ie how well it will work, not that nobody understands the bill they wrote.

I'm sure that's part of it. But honestly, I really do think a lot of these guys really did NOT know what they were doing. I've seen enough of what they have said and proposed to be sure that they are meddling in areas they do not comprehend.

 

Which isn't to say they still shouldn't act - I hoped they would. I just hope they spent some time talking with people who understand the markets before making their decisions.

 

[Balta1701]

I'm sure that's part of it. But honestly, I really do think a lot of these guys really did NOT know what they were doing. I've seen enough of what they have said and proposed to be sure that they are meddling in areas they do not comprehend.

 

Which isn't to say they still shouldn't act - I hoped they would. I just hope they spent some time talking with people who understand the markets before making their decisions.

Really, you don't think that every person remotely involved in decision making on this bill has had hours upon hours of time with finance industry lobbyists over the past year?

[NorthSideSox72]

Really, you don't think that every person remotely involved in decision making on this bill has had hours upon hours of time with finance industry lobbyists over the past year?

Not who I meant. But I think you know that.

 

[Balta1701]

Not who I meant. But I think you know that.

And at least to me...the fact that the financial industry lobbyists aren't the ones who have any idea what is going on and yet are the ones making all the decisions is kinda a big part of the problem.