Foreclosures up 30% in North Dallas - why in DFW? (Fort Worth: 2009, rent)

[DWong]

So I came across this article today. How is it that DFW is experiencing a foreclosure crisis? I understand in areas like Fl, AZ, CA and NV where home prices shot down 30%, but in DFW where there is no bubble? Sure people lose jobs and life events happens, but this is outrageous.

The avg mortgage is in the low 200k and people are still being foreclosed on? My neighbors in CA and family in FL in new areas the avg mortgage is close to 500k on a home. So how it is that these are running rampart in America's most affordable metro?

What got people in a bind in other states is that their mortgage payments shot through the roof. Not to mention, higher prices. But how pricey can a 200k mortgage be? $1600? People took out 125% on their homes and never could keep up. Did this happen in DFW?

Dallas-Fort Worth foreclosure listings jump by nearly 30% | News for Dallas, Texas | Dallas Morning News | Dallas Business News

[Blue_Bayoula]

Keep in mind that they're talking about a rate. In other words, in North Dallas, our foreclosure rate was low to begin with and it's now 30% more of that already low rate. So not a big jump overall like it sounds at first blush.

[FarNorthDallas]

Some folks put no money down. House prices have dropped a bit. Some folks are losing their jobs and can't pay any mortgage. People overbought.

Also, California investors bought a bunch of the cheap new houses here and left them empty thinking they would make money just off appreciation. They didn't even rent them out. Those people are now foreclosing on these investment properties.

[TXNGL]

Originally Posted by FarNorthDallas

Some folks put no money down. House prices have dropped a bit. Some folks are losing their jobs and can't pay any mortgage. People overbought.

Also, California investors bought a bunch of the cheap new houses here and left them empty thinking they would make money just off appreciation. They didn't even rent them out. Those people are now foreclosing on these investment properties.

I know that there are at least 3 forclosures in my immediate neighborhood. All had been bought by flippers from elderly homeowners (1960s neighborhood). The flippers just used cheap cosmetics and some paint to try and sell these houses that needed much better upgrades to sell around here. Before the bottom fell out you could sell a house here "as is" but priced fairly, or you could go all out with gutting and really nice upgrades and makes some really good $. That's not what these investors did. They did cheap and then tried to sell for top dollar. That might work in neighborhoods that are in "transition" but not in a nice, established neighborhood.

[loves2read]

think many of those types of flips were done by people who were out of state--came here and thought they would make money because this housing market was still strong but they did not understand the dynamics of the market--
they got burned...serves them right...

[lh_newbie]

The issue of foreclosures doesn't have as much to do with house prices dropping as much as it does with people buying more home than they can afford with little to no money down and having to use ARMs to qualify for the loan to begin with. Prior to the change in rules, in order to qualify for a loan, the person qualifying only had to qualify for the loan based on the initial interest rate. For example, to qualify for a 0% down, $200K loan at 6% fixed rate which would be $1199.10/month, you would have to earn $52K/year. People, regardless of where they lived, were able to instead go with an ARM that had, as an example, a teaser rate of 3.9% for the first 3 to 5 years. Under the old guidelines, banks then only required folks to qualify under that teaser rate (and they didn't care if you would be over your head after that time, cause most of the time they sold your mortgage anyhow, so it wasn't a risk to them). $200K at 3.9% would now bring your initial payments down to $934.34/month - so you'd only have to earn $40K/year. Once your teaser rate is over - and many ARMs can adjust at 2% per year, you'd jump to 5.9% in year 4 ($1186.27/month) and possibly 7.9% in year 5 ($1453.61/mo) while your still only making $40K/year. As you can probably imagine - earning before tax $3333/month and having to write a mortgage check for $1453 (plus property taxes and insurance) forces people into foreclosure if they can't sell the home. So it's sort of a 1-2 punch. People/banks got into mortgages they really couldn't afford after the teaser rate was over, then the lowering price (or even flat prices due to 6% selling fees) due to zero down forces folks to NOT be able to sell the home. The only option is foreclosure then.

So shame on banks for allowing people into mortgages the folks really couldn't afford; shame on people for not understanding finances; shame on the investment community for buying these mortgage securities without really understanding the risk; shame on the fed for allowing such loose lending standards. There is plenty of blame to go around. Hopefully this explanation shines a little light on why the issue is not tied only to one area.

People wanted (and were allowed) to get into more home than they could really afford. To compound the issue - energy prices have gone up, so folks buying more home (and presumably larger homes) than they should had to heat, cool and furnish these homes they couldn't afford to begin with.

I, for one, am and have been, a very big fan of people putting down a MINIMUM of 10% on a home. If you can't save 10%, then you've proven you are unable to save and therefore the investment community should not take the risk on you. Instead of PMI - if you put 0% down - I could see the mortgage being written in a fashion that bumps up your mortgae payment by 10-20% (making qualifying harder), then taking a portion of that money for PMI and another portion and putting it into a savings type account until such a point that the mortgagee COULD have 20% equity in their home with that money, at which point, it would be applied to their principal balance. It's just a passing thought, but an interesting one (to me at least). As you can probably tell, I am a very fiscally conservative type.

Brian

[rotorholic]

Originally Posted by DWong

So I came across this article today. How is it that DFW is experiencing a foreclosure crisis? I understand in areas like Fl, AZ, CA and NV where home prices shot down 30%, but in DFW where there is no bubble? Sure people lose jobs and life events happens, but this is outrageous.

The avg mortgage is in the low 200k and people are still being foreclosed on? My neighbors in CA and family in FL in new areas the avg mortgage is close to 500k on a home. So how it is that these are running rampart in America's most affordable metro?

What got people in a bind in other states is that their mortgage payments shot through the roof. Not to mention, higher prices. But how pricey can a 200k mortgage be? $1600? People took out 125% on their homes and never could keep up. Did this happen in DFW?

Dallas-Fort Worth foreclosure listings jump by nearly 30% | News for Dallas, Texas | Dallas Morning News | Dallas Business News

Your friends that took out the $500K mortgages in CA and FL must of been adjustable and whats those homes worth today? maybe halve if lucky? I lived grew up in socal and sold my $450k home 2 years ago worth $160k today and still droping.....

[kdogg817]

Simple loss of jobs

[Lakewooder]

Sometimes it's very risky buying out in a new development during a boom (but some folks never listen to old codgers like me who have seen it play out a couple of times):

Abandoned neighborhoods pose problems for residents left behind | Top Stories | Star-Telegram.com

[Debsi]

Where you have lower home prices, you also have people with much much lower-paying jobs buying homes. It would be impossible for the couple who both work at Wal-Mart to consider buying a home in the Southern California market. Here they can get into a home, but if one loses their job, for example, they can't make even their "small" house payment.