Home foreclosures move up-market as discounting pushes prices down
Filed under: Economy, Investing
A greater number of foreclosures are hitting the high-end real estate markets in 2009 as price discounting continues to throw more and more properties underwater. It's like a self-fulfilling prophecy: As some homeowners see their homes' values drop below the balances due on their mortgages, they give up trying to save their homes.Zillow's chief economist, Stan Humphries, found that while high-end markets accounted for only 16 percent of foreclosures in 2006, by July 2009, 30 percent of foreclosures hit the top third of homes. "That means that top-tier homes make up almost twice the proportion of foreclosures as they did just three years ago," Humphries wrote on his blog.
Foreclosures are no longer a primarily subprime problem. While in 2006 about 55 percent of foreclosures came on subprime loans, in 2009 subprimes represent just 35 percent of foreclosures, another 35 percent are in the middle tier and 30 percent are in the top tier. The primary contributing factor is higher delinquency rates in Prime, Alt-A and Option ARM mortgage products.
According to the Amherst Security Group, this problem won't go away any time soon, because:
• Loans are transitioning into delinquency/foreclosure at a rapid pace, but moving out at a slow pace;
• Cure rates are low. In other words, fewer people are paying their past-due amounts and getting back on track.
• Loans are taking longer to liquidate. In other words, the length of time between the start of the foreclosure process and the point when the lender gets control of the property is growing.
The Amherst Mortgage Insight report notes that there are currently 7 million homes in a shadow market -- homes that are either in delinquency or in foreclosure, but not yet on the market. This number translates into 135 percent of a year of existing home sales, which means that whatever numbers you're seeing now about homes sales, they don't truly reflect the storm that's yet to come.
In a related story, home buyers are still negotiating discounts on listed properties, and properties continue to list at lower and lower prices. Zillow found that buyers paid an average of 3 percent less than the listing price nationwide. In some markets, particularly coastal regions in Florida, buyers paid eight to nine percent less than listed prices. In addition to foreclosures, Florida's coastal properties have been hit hard because people can't get reasonably priced insurance for those properties. Many insurance companies have gotten out of the business of insuring on Florida's coasts thanks to the recent hurricanes. My home in Central Florida is currently insured by State Farm and it's not on the coast, but the company has already sent notices to customers that it plans to exit the Florida market completely.
Zillow has developed a chart breaking down price discounting by city metropolitan areas. Eight of the cities facing the highest discounting are in Florida. The city experiencing the highest percentage discounts is Vero Beach, Fla., at 8.9 percent or $20,974, followed by Naples, Fla., at 8 percent or $27,155. Outside of Florida, the two top cities are Atlantic City, N.J., at No. 6 with discounts of 7.2 percent or $21,532 below asking price. Morristown, Tenn., is at No. 8 with discounts of 6.9 percent or $12,118.
Stemming foreclosures is the key to getting back to a stabilized housing market, but these numbers don't look great. Yet the banks are not moving quickly to modify loans and keep people in their homes. The U.S. still has miles to go before we'll even be close to solving this crisis.
Lita Epstein has written more than 25 books, including The 250 Questions Everyone Should Ask About Buying a Foreclosure and The 250 Questions You Should Ask to Avoid Foreclosure.
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Reader Comments (Page 1 of 5)
10-12-2009 @ 12:07PM
luette said...
That CAN"T be right.....foreclosures every 13 Seconds in America.......Obama has SAVED US?
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10-12-2009 @ 12:03PM
vaughnvdg said...
No my friend OBAMA has not SAVED US. This is more about the fact the BUSH SCREWED US!!!! Hope you are reaping your benefits from voting for DUMBYA. Have a nice day!!!
10-12-2009 @ 1:07PM
John Huckleberry said...
This is what's known as "The Trickle Up Economic" policy that Republican's forgot to warn everyone about when they sold America on "The Trickle Down Economic" policy.
10-12-2009 @ 5:14PM
James said...
Gee, the rich losing their homes. That breaks my heart. Hopefully they're part of the criminal Repukes that got us into this mess to begin with.
Now if only Bush and Cheney would lose their homes.
10-12-2009 @ 11:50PM
rpf said...
No. Bush has doomed us. Obama didn't do this, Bush and his administration did.
10-12-2009 @ 11:13AM
ajgorm said...
It's like a self-fulfilling prophecy...>>>How about it is like a prophecy over greed. about a congress that supports spending like their is no tomorrow. How about the banks self written prophecy of HOW MUCH MONEY do you have as our government allows them to stay in business while the American people go out of business. private banks at that. By the time we are done paying for the loan on your house you pay four times the origonal cost to the bank. Zero interest cant even calm a banks appetite. Socialize banks not health care how dumb can we get.
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10-22-2009 @ 12:29PM
JIM said...
This has been removed twice now. What are you afraid of on Bloggingstocks? The truth?
If you are in or near foreclosure, you should possibly consult a real estate attorney using the following information.
BACKGROUND
Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments. These tranches can be further repackaged and sold again as other securities, called collateralized debt obligations (CDOs). Home loans in 2008 were so divided and spread across the financial spectrum, it was entirely possible a given homeowner could unwittingly own shares in his or her own mortgage.
Eventually, the most desirable, qualified customers dried up; they all had homes. So banks turned to customers they'd traditionally shunned -- subprime borrowers. These are borrowers with low credit ratings who pose a high risk of defaulting on their loan. But lenders of all stripes bent over backwards in the early 2000s to get this type of borrower into homes. The no-document loan was created, a type of loan for which the lender didn't ask for any information and the borrower didn't offer it. People who may have been unemployed as far as the lender knew received loans for hundreds of thousands of dollars. Why?
One answer is that, with the introduction of MBSs, lenders no longer assumed the risk of a loan default. They simply issued the loan and promptly sold it to others who ultimately took the risk if payments stopped. And since MBSs created early on were based on mortgages granted to the more dependable prime borrowers, the securities performed well. They performed so well that investors clamored for more. In response, lenders loosened their restrictions for mortgage applicants and borrowed heavily to create cash flow for loans in order to create more mortgages. Without mortgages, after all, there are no mortgage-backed securities.
http://www.pbs.org/wgbh/pages/frontline/warning/view/.
THE QUESTION
As mortgages were packaged/bundled into mortgage back securities (MBS) and sold to investors and since these MBSs were bought by investors, with some mortgages being split and owned by several institutions or people (tranches), how can the homeowner/borrower know who actually owns their mortgage? If the homeowner /borrower does not know who actually owns their mortgage, then how does the foreclosure court know who actually owns the mortgage and CAN actually proceed with the foreclosure?
The real estate attorneys representing these possible foreclosed homeowners should request that the foreclosing institution show that they ACTUALLY own the mortgage and can bring foreclosure action to court and are not just the mortgage servicer.
10-12-2009 @ 11:20AM
ajgorm said...
I would say even if the bank doubled its money over the life of the loan this would save most of us from doom.. How about paying for the price of the loan without much interest would that be fair over thirty years..BUT NOOoo we need to melt down so banks can quadruple their money..I say since Obama is so scared to socialize banks but has no problem socializing doctors and insurance companies we will be headed for a one world currency to seal the deal at six times the origonal home price so the banks can build mega banks with our money. More space bigger parties and more fees...
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10-12-2009 @ 11:28AM
ajgorm said...
Wow two posts and no censorship. They must be sleeping or late to work. The next point is COME ON how about a loan with no interest on a home HOW humane would that be,, ?? Too humane for world leaders hell bent on MORE MONEY from the middle class. HOMES are a sacred place for all of us USURY is a crime figure it out. So those that support this rip off are criminals in an implied way.
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10-12-2009 @ 4:57PM
nattxn said...
Not sleeping or late to work, they are taking Colombus day off.
10-12-2009 @ 11:34AM
ajgorm said...
Here you pay for your home four times over and they take it from you being late three months plus the price sinks ..WHAT risk do the banks take ZERO they will get bailed out..PAY me to buy a home next time FOOLS I am paying for a home that loses value pricks.. Plus they sell to people with no credit sinking prices after they tell the middle class to be accountable sinking us themselves with high rates and no PITY.
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10-12-2009 @ 11:43AM
ajgorm said...
Wow..One last thing.. Would it be a bad thing if banks lowered their rates on home loans. Or better yet if the Government socialized home loans so we could pay our medical insurance with the extra money we saved.. Sure would make more sense that giving it all to the bank. Socialize banks FOOLS not your medical are we lost or what ..The banks control the do nothings in congress figure it out or we would have an economy that works fairly that supports Americans not private banks polluting the world. Stop global warming close a bank..
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10-12-2009 @ 12:42PM
Ken said...
It would be a good thing and smart business if banks lowered their rates to help people stay in their homes. It is smart business to make money instead of loosing money. As a bank how to you account for foreclosing on a home and then you are selling it for a value less then what is owed. Or you sit on a vacant property until it can sell but have to keep paying taxes and insurance. This is stupid business. All banks should close and let the credit unions take over at least they know how to work with people and they even make a profit without beating you over the head.
10-12-2009 @ 12:01PM
Ann said...
The whole thing is just Sad, we are sending billions of dollars overseas to help other countries, but are putting people out on the street in America. The Banks own the government, there are many ways to keep people in their homes, and to the self-righteous who say "they shouldn't have gotten into bad loans", the foreclosures today are people who have lost their jobs, and the banks keep raising their interest rate. I work for a company who does non-profit modifications, and see people in their 80's that the banks have given these crazy loans to, people who are getting $1200. social security and their house payment is $1000 and the banks don't care.
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10-12-2009 @ 12:04PM
Ken said...
This just proves one more part of the bailout that congress approved. That money was to help banks and free up credit. It also was for banks to help people behind in their mortgages work out a plan so they could keep their homes. Since the government did not place stiff enough rules on the banks the banks chose to do nothing. Now banks are sitting on unvalued homes that they can not sell. This is stupid the banks should have done more to keep the people in these homes and work it out that they would collect something. Now they are sitting on vacant properties that they have to pay taxes and insurance on until they can sell it. Smart business!!
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10-12-2009 @ 12:07PM
vaughnvdg said...
I can still remember DUMBYA and McCain saying THE FUNDAMENTALS OF OUR ECONOMY ARE STRONG last year. Boy were those guys on top of things!!!!
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10-12-2009 @ 5:20PM
Just the FACTS said...
Remember the day…
January 3rd, 2007 was the day the DemoCRAPS took over the Senate and the Congress:
At the time:
The DOW Jones closed at 12,621.77
The GDP for the previous quarter was 3.5%
The Unemployment rate was 4.6%
George Bush’s Economic policies SET A RECORD of 52 STRAIGHT MONTHS of JOB CREATION!
Remember the day…
January 3rd, 2007 was the day that Barney Frank took over the House Financial Services Committee and Chris Dodd took over the Senate Banking Committee.
The economic meltdown that happened 15 months later was in what part of the economy?
BANKING AND FINANCIAL SERVICES!!!
THANK YOU DEMOCRAPS for taking us from 13,000 DOW, 3.5 GDP and 4.6% Unemployment… to this CRISIS by (among MANY other things) dumping 5-6 TRILLION Dollars of toxic loans on the ecomony from YOUR Fannie Mae and Freddie Mac FIASCOS!
So when you want to blame Bush…
REMEMBER JANUARY 3rd, 2007…. THE DAY THE DEMOCRATS TOOK OVER!
10-12-2009 @ 12:09PM
paryback said...
obama is at fault because he has no clue about anything, and he canot speak without a telepromter,which means he is incompetant and canot stand up and say anything without it , what a fool
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10-12-2009 @ 4:45PM
jc said...
DumBushBoy couldn't speak a complete sentence with or without a teleprompter. Talk about an embarrassment!! As I traveled through Europe during his presidency, it was obvious that he was considered the joke of all times.
10-12-2009 @ 12:25PM
Willy, MBA said...
Yes, our economy is out of whack for most Americans. Yet, in a related article today, "Economists see us in a recovery".
Huh? You have 20,000,000 plus people out of work, with no jobs in sight, with more being added daily. People are defaulting on their mortgages and rents every month now. People are "upside down" on their house and car loans. Meaning, they owe more than what the house or car are worth. In addittion, all the bills just to stay alive keep going up!! Middle class folks are really screwed these days.
The government is broke, yet keeps spending money it does not have. Open borders only adds to the drain on our resources. State and local governments are going broke, because sale tax reciepts are down, and demands for services are going up.
Yes, we are in deep trouble. Yet, our leaders are silent, as if there were no problems. We are fighting for our very survival as a free nation. I don't understand why there is no leadership in Washington to try to halt our slide into the dumps.
The economist's say we are in recovery? Fools, WE HAVE NOT EVEN HIT BOTTOM YET!!!!
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