Despite federal rate cuts, mortgage rates that remain well below historic averages and even HOPE, according to the Mortgage Bankers Association U.S. foreclosure rates are at an all-time high.
New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.
“We’re seeing people give up even before they get to the reset because they couldn’t afford the home in the first place,” said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.
And while the majority of new foreclosures (42%) are on adjustable-rate subprime mortgage products, “[a]nother 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans, according to the report.”
Ah yes, those ARMS.
∙ U.S. Mortgage Foreclosures Rise as Owners ‘Give Up’ [Bloomberg]
∙ An ARM (And Quite Possibly A Leg) [SocketSite 6/05]
This will continue for some time.
I’ve referenced Ivy Zellman’s Credit Suisse report several times now… and it clearly shows that the biggest foreclosure strain on the market would be from around March 2007 until January 2009 (this will be due mainly to the subprime resets)
THUS WE WILL LIKELY CONTINUE TO HAVE MASSIVE FORECLOSURES FOR ANOTHER 9 MONTHS OR SO
and then we get a break for about 6 months, and then we get another doozy from June of 2009 until 2012!!!!
This is why anybody who says “Real Estate will turn around soon” or who thinks that we’ll go back to rapid appreciation days anytime soon (within the next half decade) doesn’t understand capital markets, and exactly HOW BAD lending got, and HOW BAD AND HOW LONG the repurcussions will last.
To read her report (it is EXCELLENT and worth reading I think for everybody). The first part is somewhat technical, but then it calms down into fairly understandable language, and then lots of graphs which tell the story.
here is a link to the March 2007 update of her chart. PAGE 47 is the chart that I used for my above analysis (she started writing about subprime/alt a implosions at Credit Suisse starting in 2006… the March 2007 is an update)
Ivy’s report
ex-Sfer –
How did you get access to the information being posted now about advisers who foresaw this disaster in 2006? As far as I know, it wasn’t widely available and the banks weren’t coming clean – and still haven’t. The mortgage broker says it wasn’t his fault, Wall Street wanted to buy the crazy loans. The agents said not to believe the headlines because real estate in SF doesn’t go down. The taste of regret is bitter indeed.
michiko:
There is a big difference between what analysts tell the public (through CNBC), and what they tell their own clients.
often times you’ll see that analysts will rate something one way on TV, and then in their internal memos they will say something quite different.
Ivy Zellman was a hero to many of us who follow all-things-financial. She was the analyst who told a top homebuilder CEO (Bob Toll) that he was “drinking his own kool-aid” on a conference call!
she was the ONLY analyst at the time who was really doing big time research debunking the Real Estate myth of the time (that RE can only go up, that there is no bubble, etc). there were other economists harping on this, and bloggers, but very few to no analysts.
IT cost her her job, she was let go by Credit Suisse for being overly pessimistic.
I personally read a LOT of different economic sites in order to keep up with what’s going on.
One site will link to another which links to another and then you start getting a better picture.
And yes, I read/watch LOTS of bullish sites as well. (I watch Squawk Box and Larry Kudlow several times a week as example)
over the last few years, the bull arguments are very thin, and the bear much stronger… so I’ve become a bear.
but if you dig up some of my old posts here on socketsite, you’ll see I didn’t leave the stock market until recently. And I didn’t know for sure housing was dead until the Bear Stearns funds blew up last year (that was when I knew housing was dead).
“How did you get access to the information being posted now about advisers who foresaw this disaster in 2006”
Oh man, have you ever been to an open house in the Bay Area in say 2004, 2005, 2006? A 10 year old could have foreseen that disaster.
Hey ex SF-er – good post. Re CNBC, as this bear market plays out, what are the chances that CNBC pops a cap into Kudlow & Cramer and gets some more credible commentators?
[Editor’s Note: Credible and on CNBC? We have at least one suggestion…]