The Palm Beach Post reports on the growing foreclosure rates:
“Growing numbers of local homeowners were forced into foreclosure last month - or chose to default - as the worst housing crisis in 16 years continued to take its toll.”
“In Palm Beach County, lenders foreclosed on 1,196 homes last month, up from 509 in September 2006, according to the county clerk's office. That's a 135 percent increase, and a rate of one foreclosure for every 518 households in Palm Beach County, based on population reported in the Census Bureau's latest American Community Survey.”
“When home values were growing faster than kudzu, Sahnger said he knew of local homeowners who refinanced their house every 12 months. The house, originally valued at $300,000, soared to $900,000 at the peak of appreciation - and then came crashing back down, Sahnger said.”
“‘People who were surviving off serial refinancing are stuck now,’ he said. ‘They had the opportunity to dip back into the pool and it gave them liquidity, but now there's no liquidity left.’”
In national news, The Miami Herald reports that Congressional Democrats are pressuring President Bush to do more about the subprime crisis:
“Congress' top Democrats demanded quick action on the subprime mortgage crisis, saying President Bush has been slow to address a situation that could cost millions of people their homes.”
“‘This is a national crisis. Too bad it's taken so long to realize that we have a crisis,’ Senate Majority Leader Harry Reid of Nevada said at a joint news conference with House Speaker Nancy Pelosi of California.”
“Pelosi, Reid and other Democrats want the president to appoint a special adviser to coordinate the federal response to the subprime mortgage crisis.”
“‘The subprime crisis demands action, and we're working to protect families who have lost their home or are in danger of foreclosure,’ Pelosi said.”
“They repeated their demands for the White House to support more government spending to help homeowners avoid foreclosure, to increase the portfolio caps for home-loan finance companies Fannie Mae and Freddie Mac, and to agree to their plans to modernize the Federal Housing Administration.”
However, the Miami Herald shows that the bailout could ultimately saddle taxpayers with defaulted loans:
Efforts in Congress to let mortgage companies Fannie Mae and Freddie Mac refinance more at-risk loans could have a key flaw: many of those loans were made with such loose standards that borrowers are likely to default anyway, analysts said.
To take on more of those subprime loans, Fannie and Freddie would have to charge high-risk borrowers a hefty premium, said Paul Miller, an analyst with Friedman, Billings, Ramsey & Co.
"It makes great headlines, but a lot of these loans will not fit into Fannie and Freddie's criteria," Miller said. "Some of these subprime loans are not fixable."
For example, Fannie and Freddie-backed loans require borrowers to pay extra for private mortgage insurance if they can't afford a 20 percent down payment. Some borrowers may not be able to pay that surcharge.
Still, all these worries about foreclosures and the subprime crisis may be irrelevant if you buy the advice of former Chairman of the Federal Reserve, Alan Greenspan:
“The meltdown of the U.S. subprime lending market that has triggered a global credit squeeze is largely over, former U.S. Federal Reserve Chairman Alan Greenspan said Wednesday.”
“‘The worst is over,’ he said at a meeting with local businessmen.”
Keep in mind, this is the same Greenspan that claims that he had no idea that the subprime crisis was developing while he ran the Fed. He also consistently downplayed the housing bubble while Chairman, claiming that housing bubble was nothing more than a little "froth" in some localized markets
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I think Greenspan is referring to the effects the subprime will have on the finanial markets, not the homeowners and RE markets.
Why should the government bail-out
irresponsible buyers.
We're now in blame game, dodge, and cover-up mode.
The Democrats are blaming the President and the former Republican Congress. These are the same Democrats who, up until very recently, were showing off record-high homeownership rates in the United States.
Bush and the rest of the Republicans are blaming the lenders even though they had regulatory oversight on those same lenders.
Paulsen, Greenspan, and Bernanke all are downplaying the mess -- especially Greenspan with his revisionist history.
The F@cked Buyers blame EVERYONE else except themselves.
Democrats, Republicans, the Fed, and all the F@cked Buyers wanted this. They wanted to push all Americans to buy homes. They wanted the 75% of Americans who own homes to experience 100% increses in the values of their homes. They wanted Americans to use HELOC to spend more in the economy.
Now, that it's time to pay the piper, no one will take any responsibility. In the end it's all of their faults.
"Why should the government bail-out irresponsible buyers."
Congress doesn't care about the buyers. This isn't a bailout of irresponsible buyers; it's a bailout of irresponsible LENDERS.
The only reason that there is push to "help" these folks is to help all the fat cats that are losing billions on CDOs.
A lot of blame can go around, lets not forget the Homebuilders. I went to a preconstruction sale here in Boca in 2004 or 05. They told me on the phone that the town homes will start in the mid. 300.000. When we got there people were staying in line for two days! and prices were pushed up to 475.000 and up. I walked out, others bought like there is no tomorrow.
The image of people waiting in line to buy those town homes is so striking. It seems like something you'd read in a history book in school and say to yourself 'Gee, those folks way back then were out of their minds'.
I hope once the country puts this all behind us, there will be a solid documentary made about the housing bust so future generations will be able to watch what happened. They'll need something powerful and visual to counter the 'real estate never goes up' arguments of Realtors of the Future (who will by then have developed a technology to wipe the Internet clean of any article or blog mentioning a housing bust:).
oops
I meant the 'real estate ALWAYS goes up' arguments.
It always goes up, but not overnight or year to year!! You could not or ever buy anything for the prices of the 1970 or 1980 or even 90's.
Braziliano,
People who bought homes in South Florida in 2005 will not see an inflation-adjusted gain in our lifetime.
Unless there is another unsustainable bubble, 50 years from now, they will still be in hole after adjusting for inflation.
Gator Ted,
Of course most buyers will ignore that whole pesky "inflation" thing.
They are only going to look at purchase price vs sale price.
I don't know why people are even quoting Greenspan anymore.
He is either absolutely clueless or full of BS.
Hasn't he looked at the mortgage reset chart? We're only seeing the tip of the iceberg as far as the subprime mess is concerned. It can only get worse, not better. Most of the resets happen next year, and forclosure rates are soaring. And I believe the banks are hiding quite a bit. They're trying to stave off the bad news as long as possible. But they're only delaying the inevitable.
Keep an eye on the "Mortgage Implode O Meter":
http://ml-implode.com/.
That number will easily triple or quadruple before this whole thing unwinds.
Greenspan is about as credible as David Lereah at this point.
Solution -
Commodity Standard Monetary Policy (ie - Gold or Silver Standard)
Hey Gator!
The problem is the Government is telling us inflation is only 3%, but in reality it is much higher. Look at the prices in Publix or at the Pumps.
Commodities are exploding, cooper, steel, lumber, oil. Try to build a house right now, and you will be surprised of what it will cost. Also, gov. fees are going up like crazy. That is why people who think RE prices will return to the mid 90's are wrong!
Braziliano,
If actual inflation is actually highter than the government-issued rates, doesn't that prove my point even further?
yes, it does.
We're now in blame game, dodge, and cover-up mode.
Excellent comment, well stated.
Even if they manage to save 75-80% of the defaults, the remaining 20-25% will exert tremendous downward pressure on the existing home prices.
"That is why people who think RE prices will return to the mid 90's are wrong!"
I don't think many people are predicting 90's prices. I agree that is not likely.
However, you would only have to go back to 2003 prices to take 30-40% off the 2005 peak prices. The largest amount of appreciation occurred during the last 2 years of the boom.
So, even 2003 prices (which I think ARE quite possible) would mean a BIG drop from peak prices.
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