Good evening!
Well it was a rough day on Wall St. today. Financials ruled the headlines as two bank CEO's got the pink slip and S&P slapped the the big banks with downgrades. It was nice to get away from the oil obsession we have had over the past few weeks.
Before I discuss the foreclosure data, I wanted to point everyone to a great read that I found surrounding America's obsession of cheap money and the resulting debt bubble. The commentary is by Christopher Grey and I think you will enjoy it.
The Foreclosure Data
The Wall St. Journal reported the most recent foreclosure data for April, and the numbers are staggering. Here are a few highlights from the Wall Street Journal:
"Number of Foreclosed Homes Keeps Rising
Lenders Cut Prices To Jump-Start Sales As Inventory Grows
By JAMES R. HAGERTYJune 2, 2008; Page A3
The number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties.
Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm based in Santa Ana, Calif., that collects data from lenders and county clerks. The April total works out to about one in seven previously occupied homes available for sale nationwide.
With home prices falling, "holding the assets means further losses," said Mark Fleming, chief economist for First American CoreLogic. Some lenders now are cutting prices as often as every 20 days on homes that aren't selling, said David McCarthy, chief executive officer of Integrated Asset Services LLC, a Denver-based company that helps banks value and sell REO homes.
Meanwhile, long-term interest rates rose last week, marking another potential drag on the housing market. The average rate on 30-year fixed rate loans eligible for sale to government-sponsored investors Fannie Mae and Freddie Mac was 6.17%, up from 6.02% a week earlier, according to HSH Associates, a financial publisher in Pompton Plains, N.J."
My take:
Gee I wonder why financials are down today(not)? This data is eye popping. The number of forclosures is more than double the rate from last year, and up significantly from only three months earlier.
Anyone thinking we are through the worst of the credit crisis is crazy. Foreclosures are accelerating, and the financials are taking huge losses as a result. Its only getting worse folks!
What really caught my eye in this story was the fact that some lenders are now dropping prices on REO's every 20 days if they aren't selling. This is why you don't buy foreclosures now!!! In three weeks the same place most likely will be cheaper.
Any flipper buying at this time in the housing cycle is making a huge mistake. I gave you an example of a guy who got caught yesterday buying a house at auction that he can't sell.
On top of all of this, interest rates also rose last week up to 6.17% up from 6.03%. Remember that jump in the ten year in the bond market that I discussed last week? I am willing to bet this is the main reason you saw this rate jump.
Stay on the sidelines and ride out this financial storm. There are no signs of it letting up anytime soon.
Until tomorrow!
5 comments:
uh oh. Lehman just announced they have to raise capital.
A month ago they were insistant that they didn't need to raise capital.
Apparantly they bet against financials as a hedge and it blew up in their face as the financials rose post Bear Stearns.
I will have a link tomorrow.
FYI the futures are down on the Lehman news. Tomorrow could be ugly.
These foreclosure numbers are astoundingly bad. It would appear that banks are caught in a downward spiral because if they continue to cut the prices for REO properties, more surrounding property values plummet leading to even more defaults and foreclosures.
Yet they can't afford to carry these properties on their books, as more properties stack up every day, so they must cut prices.
Something tells me that when we finally get to see how deep this rabbit hole goes, the bottom is going to be a LONG way down.
Knife-Catching While Free-Falling
Jeff, I know you don't blog on specific properties; nonetheless, I really like how this one focuses on the price free fall for sellers, and the knife-catching by buyers, in assorted developments. Comes with photos! Its address-specificity is allows tracking buyer behavior of those who decide to close during this free fall. And ya gotta love the title: I Tawt I Taw Da Bottom"
http://bubbletracking.blogspot.com/2008/03/i-tawt-i-taw-da-bottom-in-poway.html
IMO: Now that banks are pulling HELOCs and de-activating credit card lines, I think the pro-bailout argument is deflating (no pun intended). Even if they keep their under-water home, most homeowners will no longer be able to stimulate the economy through spending that is directly or psychologically buttressed by the value of their home (as an ATM).
This argument needs to be put in the face of Congress and Rep. Barney Frank.
Stop the Housing BailOut : http://www.stopthehousingbailout.com/
shrp avl
I totally agree. This is like a massive spiral downward that feeds on itself.
It will kill neighborhood values and lead to HELOCS ,virtually disappearing in certian bubble areas.
Who knows how deep this rabbit hole is???
I know one thing for sure, the downside is showing no signs of slowing down. In fact, it is be accelerating.
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