A common theme in what we have come to call "disaster data" is that the next set of "disaster data" will almost uniformly be worse than expected, and that it will follow weeks of talking heads insisting that the worst is past us, since the last data set was so ugly.
One in five U.S. homeowners with mortgages owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows.About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.
Oh boy.
One in five U.S. mortgage borrowers are underwater [Reuters]
Posted by guest , Mar 04, 2009 10:08AM
Sounds like now is the time to buy!!
Posted by guest , Mar 04, 2009 10:09AM
It seems to be conventional wisdom that homeowners just stop paying mortgages when they owe more than the house is worth. Is that really true? Does data back that up? Just askin'. There is a downside to default, after all.
Posted by guest , Mar 04, 2009 10:22AM
GE stock down 16% ... fun to watch the CNBC guys try to tiptoe around the fact that their parent is getting the Marcellus Wallace treatment
Posted by guest , Mar 04, 2009 10:22AM
GE stock price is tanking like a rock. All those DIV investors didn't like that DIV cut.
Faber is virtually crying on TV about GE shares. Market cap is being punished today... WGAF about the money GE saves by paying no yield... Moody's is gonna downgrade.
$4 by Friday! GO GE!
Posted by guest , Mar 04, 2009 10:27AM
The Messiah thinks stocks are a good buy, so how come the people who wanted change they could believe in, aren't believing in GE? WTF? When is the Keebler Elf going to bail out GE?
Posted by MarshallStack , Mar 04, 2009 10:28AM
Five to one, baby, one in five.
No one here gets out alive, now.
You get yours, baby, I'll get mine.
Gonna make it, baby, if we try.
The old get old, and the young get stronger.
May take a week, and it may take longer.
They got the guns, but we got the numbers.
Gonna win yeah, we're taking over.
Come on!
Posted by guest , Mar 04, 2009 10:29AM
GECC is cancer.
Posted by guest , Mar 04, 2009 10:35AM
if home prices were going to stay at current levels forever, then it would make sense to walk away from an underwater mortgage..
but if you are a homeowner who bought a home with the intention of paying the full mortgage off and living in the home for the length of the mortgage, then what the home is currently worth is irrelevant.. lower home prices do not cause defaults
the only reason collapsing home prices are a problem is because people bought properties they could not afford.. this includes scheisters who wanted to flip them in 6 months and turn a profit and the subprime borrowers who assumed theyd be able to sell the house if they were ever at risk of default
Posted by guest , Mar 04, 2009 10:39AM
@8 You're Crazy. Speculators who bought houses to flip will dump them in a NY minute! Some homeowners will walk away as well. Sure some will hang in there to protect their credit rating and hope the house value rises again, but to say "lower home proces do not cause defaults" is Idiotic! What do you think is causing all the defaults in Florida, CA and Nevada....
Go drink beer in a bar!
Posted by guest , Mar 04, 2009 10:40AM
When will the U.S. finally change its ridiculous mandatory non-recourse mortage laws that exist in most states? If any politician had the balls to change that this "being underwater" thingy would not be a problem at all. No walking away from your mortgage if banks can come after your other assets.
Posted by guest , Mar 04, 2009 10:46AM
*WHACK* Thank you Federal Reserve may I have another.
Posted by guest , Mar 04, 2009 10:49AM
@8...when your $800,000 home is now worth $400,000 and you still have 28 years to pay what do you do. Odds are 28 years from now you will still be under water.
What do you do? You stop paying. You live there without paying for as long as possible. Or you rent the home to someone.
In FL it's taking the banks 8 to 14 months to repo the homes. The banks don't want the homes, but after so long they have to take posession.
It's about capital preservation and the prospect of being able to by a similar home for less money down the road. Paying cash! F the mortgage! As prices continue to plummet more and more people will do this.
Posted by guest , Mar 04, 2009 10:56AM
@12 here...Add to the scerario above massive unemployment. That should paint a pretty picture. Oh yea...one more thing....all the baby boomers holding homes in the retirement states that have had half their retirement erased may also say good bye to their retirement dreams. Many are doing this now.
Posted by Anal_yst , Mar 04, 2009 10:58AM
@10
And how substantial do you think most of these people's "other assets" are, prey tell? The leased Benz? The stereo? Maybe
Posted by guest , Mar 04, 2009 11:01AM
Who says you can't take it with you?
http://www.transportinc.biz/truck_front.jpg
Posted by guest , Mar 04, 2009 11:14AM
@12 Bottom line is speculators bought in shit markets where like Miami where condos were developed in huge supply after the hurricanes. Those condos are worth shit because they are so many of them (ie devalued them). Now if you bought with a fluctuating intrest rate too and the home value goes down well you lost your investment and most likely your turn around time was NOT 28 years.
Now in NYC and LA and other international city's that are not vacation or transient areas the story is different. If I buy in NYC most likely I had a long term goal (not always) but most people who understamd the market werent looking to FLIP in NYC. Its more of a blue chip stock you wouldnt buy Birk Hath and flip in 2 weeks). So most poeple took the mortgage and yes the property is worth less then they paid but they will most likely be in the apt long enough to see it come back. Of course in this markert there are many examples contrary to this because they over paid for new dev that has been devalued by volume like in FL but for the most part if you can wait...5 years will show you a nice return on your home. Also- in nYC we have the Coops where the boards as shitty as they can be, keep the buyer in check by reviewing their finances and allowing only a small portion of the purchas be borrowed. this helps to maintain the builind value and keeps shitheads from going under water!!
Posted by guest , Mar 04, 2009 11:14AM
Don't know if this is happening all over, but in certain areas of CA, FL, MI the foreclosed homes are not being bought at auction. The bank can either try and sell them or do nothing. That means the owner is still on the hook. A foreclosure that doesn't end. And it is on the rise. Wonder what jolly fun this may turn into?
Posted by guest , Mar 04, 2009 11:17AM
I don't understand the incentive to lose your down payment.. if you bought an 800K home and put 10% down, then you are giving up the 80k you saved to buy the house, not sure who would give that up that easily.. i would think you'd have a better chance trying to ride out the storm and hope prices bottom out.. prices cant go much lower
like i said the only reason lower prices is a problem is that people cant sell to bail themselves out of a mortgage they could never afford--this includes speculators and subprime..
Posted by guest , Mar 04, 2009 11:22AM
Anal_yst, @10 here
Their current and future paychecks...
Posted by guest , Mar 04, 2009 11:30AM
10 Change the non-recourse laws and you will simply have more bankruptcies. The way it works now, housing (both asset and liability - house and related mortgage debt) are essentially fenced off. Don't see why that's so bad.
16 There are a lot of flippers in NY. Example: a 60 story on 42st/12ave closed recently. The purchasers were hoping to flip but, guess what, they now own. See Craigs List and youll find people advertising sublets there by the week. A disaster waiting to happen. And a lot of product is coming on the market as well.
Posted by guest , Mar 04, 2009 11:34AM
@18 People are walking from the 80g to save money. These are people who bought new homes. They made a deal in a differnet market 6-8 months (or longer) ago to buy something priced at X now the unit is worth in some cases 50% of the price they were going to buy it at. Even a 3 year old can do that math. Lose 80g now or lose 500g at closing?
I'll take one for the tean at 80g.
Posted by guest , Mar 04, 2009 11:46AM
@20 as i said there are cases contrary to my over all statmet but they dont define the market place issues as visibly as they do in other troubled areas like FL, Vegas, southern CA. Of cousre there are people who bought in new developemnts and got fucked they are stupidly selling on Craigs list to ensure they never see a dime. NYC's troubles are differnet and in away more severe. Most of our poperty purchases require a JUMBO loan or bigger. Of course these are loans that are rare at best so that hurts. Add to that most of our buying engine was powered by WS bonuses now there are non and worse layoffs are sky rocketing. add to that any bonuses getting paid are mostly in stock, banks do not look at stock bonuses as cash at loan time so...NYC is in its own shit soup but not the same soup as other distressed areas. If you have cash and do not need a mortgage, hold until spring/summer you will get very good deals in NYC. These willbe deals you can live with and feel good about your purchase. also- we ahve 22,000 new dev condos coming on the market so yes inventory is high but not if you look at the fact that we have 8M people living in nyc. Once the market picks up you will see prices go up to. do your reasearch and be ready to pounce. They built it and you will come...
Posted by StupidEquityGuy , Mar 04, 2009 12:29PM
BHO needs to recall this Isoroku Yamamoto quote.
"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."
And that giant is the working taxpayer.
Posted by Anal_yst , Mar 04, 2009 12:42PM
@19
Yes, allowing banks recourse to current/future paychecks provides a great incentive for these people do get their sh*t together.
I see what you're saying, but especially now it doesn't seem very practical (and certainly not politically plausible).
Posted by guest , Mar 04, 2009 1:02PM
@23
Dear media,
95 percent of Americans are getting a tax cut with Obama's budget. So framing this as a tax hike makes you look pretty stupid. And dishonest. And wrong. So stop it.
Hugs and kisses,
kos
Posted by guest , Mar 04, 2009 1:11PM
@23
Apparently, Obama would also do well to distinguish the apocryphal from the factual:
http://en.wikipedia.org/wiki/Isoroku_Yamamoto%27s_sleeping_giant_quote
Posted by guest , Mar 04, 2009 2:23PM
8/18 is dead on. Value of your home has absolutely nothing to do with your ability to pay your mortgage. The only reason it is relevant is if you need to sell because you are moving or can't afford your payment.
Posted by guest , Mar 04, 2009 3:22PM
@19 here,
I don't think it is politically plausible, no, but just the thought of seeing Barney Frank blow a gasket at the proposal gives me some hope. You would probably have to do it with a change in personal bankruptcy laws, which DEFINITELY will not happen anytime soon.
As for the practicality of it, I believe it could actually help spur lending, and with lower downpayments, and so immediate implementation could have a positive effect in the housing market.
Posted by guest , Apr 28, 2009 9:47AM
I have left GE Capital in the last 6 months and believe that they are in really bad shape. I know that it's unthinkable that such a large corporate (still AAA rated) could fail but I really have my doubts about its long term survival. They are sitting on too many "assets" which could turn into bad debt. I know that defaults in their Leasing arm were accelerating at a scary level. I'm most concerned about GE Money, their credit card arm, as there is just such a big number which is totally unsecured. Again, the number of defaults has risen heavily and this is just the tip of the iceberg. I'd offer 10-1 that the company fails in the next 18 months. Any takers ?
Posted by guest , Apr 28, 2009 9:48AM
I have left GE Capital in the last 6 months and believe that they are in really bad shape. I know that it's unthinkable that such a large corporate (still AAA rated) could fail but I really have my doubts about its long term survival. They are sitting on too many "assets" which could turn into bad debt. I know that defaults in their Leasing arm were accelerating at a scary level. I'm most concerned about GE Money, their credit card arm, as there is just such a big number which is totally unsecured. Again, the number of defaults has risen heavily and this is just the tip of the iceberg. I'd offer 10-1 that the company fails in the next 18 months. Any takers ?