Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The reason why we are in this mess is because of bad loans made to consumers who could not afford it. It is my belief that we will get out of this mortgage mess by the end of 2010. That's when the majority of bad loans will have passed. Either people would have lost their homes to foreclosure by than or refinance.
Most people who stretch their housing budgets during the housing boom took out 2, 3, or 5 year ARM either interest only or option ARMs.
So the mortgage approvals spiked in 2004 (with the lowest interest rates in history) and 2005. So assuming the majority of people made these bad loans during this time, you can reasonable assume this:
Borrowing making loans in 2004 with 2, 3 ,5 year ARMs; you see these defaults happening in 2006 (these was significant activity on subprime loans going bad starting in 2006, and the media caught a hold of it with the full blowup of subprimes in 2007. Next year you will continue people seeing defaults on people who took out 5 ARM years in 2004. So 2009 will continue to see another bad year.
Same thing with borrowers who took out loans in 2005. Assuming 2,3, and 5 year loans. The subprimes starting defaulting in 2007 on their 2 year interest only ARM/option ARMs when they could not refinance or get of the loans because the housing market was starting tanking and they were underwater. The 3 year ARMs/option ARMs taken out in 2005 are causing a mess in 2008. Fast forward to 2010 and the 5 year ARMs will set to reset and those people will be in trouble.
So I do not see things settling out until the majority of loans made in 2004 and 2005 finally are off the books by the end of 2010.
it depends on how long it takes for the inventory of foreclosures to be sold off. Also, it depends on the area... Florida, MI, CA, and other tough states will be longer.
You know....this information is actually available online. You don't need to speculate about it.
As you can see its not until 2012 that things get back to normal, but since it can take almost a year from the time of default to the time it is listed it won't be until 2013 when foreclosures from the housing bubble really start to go away. See:
What you are saying is largely true of subprime though. Most of the subprime crap from the bubble will be off the books by 2010. But between 2004~2007 there were a lot of (prime) alt-A's originated. The worse are the pay option ARMs which allow you in many cases to pay less than even the interest owned on the loan (i.e., negative amortization). 70% of people with these loans are paying the min option.
The wave of Alt-A defaults is going to kill the higher end properties just as subprime killed cheaper lower end communities. In some sense these loans are even worse than subprime as many of the people completely lied about their income and can only afford the minimum payment. Due to the fraud and the huge gap between their income and what is required to pay the loan when the payments recast these loans will prove to be very hard to modify in any way.
You seem to be making a lot of most trying to convince yourself or a recovery in housing around the corner. Is this the denial phase for you?
You know....this information is actually available online. You don't need to speculate about it.
You seem to be making a lot of most trying to convince yourself or a recovery in housing around the corner. Is this the denial phase for you?
I'm not trying to convince anyone that a recovery is right around the corner. I think a market stabilization will be reached within the next 2 years. I'm sure that the market after that time (whether it be 2010-2011) will be flat with a 1-3% house appreication.
Some homeowners will be screwed because their homes are underwater and they are too leveraged financially to get out of the mess. The government cannot help out everyone.
If there's something to be had of the mess we as a country are in; it's puts more emphasis on the american way to save. Americans need to learn they need to save more than 1% annually. Americans need to live within their means. They need to do what Europeans do....save 10% of their annual income.
I think that in the next two years homes will stabalise and many areas will see more normal appraciations. In some areas it will take ten years as their economny continues to be bad and people move with the conditions. You will also see some areas where the homes in the highend that were bought by people in the middle income groups in these times for low cost ;go down because they wouldn't be able to afford the upkeep. They will be shocked when they get that $50,000 estimate for a new roof etc.JMHO
You made some very good points and I think that was an insightful post.
I would like to add, however, that here in Phoenix where our home values shot up 50 to 100% in two years time, litterally every person I know took out a 100k equity line. Most of those people enjoyed new flat screen TV's, bought a Mercedes or Hummer, and took the family to Hawaii. Twice.
Fast forward to 2008. That phantom monetary gain they thought they had is now gone, the party is over, and they are left paying the bills on that equity line. Some can afford it. Many of the people I know are realtors, mortgage brokers, or home builders, and their income is basically gone. They cannot afford it. And this huge portion will likely default in the coming years and will not show up in your subprime and arm statistics.
I'm not trying to convince anyone that a recovery is right around the corner. I think a market stabilization will be reached within the next 2 years. I'm sure that the market after that time (whether it be 2010-2011) will be flat with a 1-3% house appreication.
How is the market going to stabilize in 2 years when there is going to be elevated foreclosure activity up until 2013?
The typical behavior of a market crash is a few years of declines, a few years of stagnant prices (no meaningful appreciation) and then finally after around 8~10 homes will start to appreciate. But this run up in house prices was the largest in US history, so the crash could last very long. At the very least it should last as long as the run up, around 8 years.
I would think the large amount of unemployed and underemplyed will make a difference, too. And also union wages with perks are cut nearly in half or are disappearing altogether. This has to impact housing sales and more than some fixed mortgages. It's a tough economy when you have to chose between food and a house payment.
I would think the large amount of unemployed and underemplyed will make a difference, too. And also union wages with perks are cut nearly in half or are disappearing altogether. This has to impact housing sales and more than some fixed mortgages. It's a tough economy when you have to chose between food and a house payment.
You brought up an important point. The models showing an early housing recovery all pretty much assumed that the economy would be in good shape.
What happens to all those models when you start adding in the tens of thousands of jobs that we've been losing every week?
Actually, the major financial firms have different sets of projections based on the direction of the economy.
For example JP Morgan projects that housing will decline by:
California 44% 48% 58%
US 25% 28% 37%
Where the first number is there current projection (with 7% unemployment), the second is for a deep recession (7.5% unemployment) and last with a severe recession (with 8% unemployment).
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
