I read an article today that made me actually wonder what the H - E x 2 hockey sticks is going on in our industry? Below are some excerpts of an a New York Times article by VIKAS BAJAJ and EDMUND L. ANDREWS.
I just also spoke with a friend who is a land manger for a major local developer. "We are dumping land at ‘nobody needs it' prices" he tells me. I know that there are many people out there stating that the media is scaring the public, but I'm not so sure. Here's the excerpts from Reports Suggest Broader Losses From Mortgages
Merrill Lynch said yesterday that it would take a charge for mortgage-related securities on its books that is $3 billion more than the $5 billion it expected just two weeks ago.
And a report from the National Association of Realtors showed that sales of existing homes in September fell twice as much as economists had expected, to their lowest level in nearly 10 years
In a new report to be issued today, the Joint Economic Committee of Congress predicts about two million foreclosures by the end of next year on homes purchased with subprime mortgages. That estimate is far higher than the Bush administration's prediction in September of 500,000 foreclosures, which in itself would be a tidal wave compared with recent years. Congressional aides provided details of the report yesterday to The New York Times.
The Joint Economic Committee estimates that the lost of real estate wealth just from foreclosures on subprime loans will be about $71 billion. An additional $32 billion would be lost because foreclosed homes tend to drive down the prices of other houses in the neighborhood.
Those figures would cause a decline of $917 million in lost property tax revenue to state and local governments, which will also have to spend more on policing neighborhoods with vacant homes. The states most likely to be hard hit fall into two categories: those where prices had been rising fastest, like California and Florida, and Midwest states with weak economies, like Michigan and Ohio, where people with low or moderate incomes made heavy use of subprime loans to become homeowners and consolidate debts.
Economists at Goldman Sachs have predicted prices will drop by 15 percent, meaning an overall decline of more than $3 trillion; other forecasters have said the decline could be 20 percent or more.
In the next 18 months, interest rates on more than two million homes loans will reset to higher adjustable rates.
Inventories of unsold existing homes rose last month to their highest level in almost 20 years.
The housing bust has also led to job losses. From the start of 2003 to March 2006, housing-related businesses like mortgage companies, home builders and contractors added 1.3 million jobs, or about 23 percent of all new jobs created in that period, according to an analysis by Mark Zandi, chief economist at Moody'sEconomy.com. Since then, the housing business has shed 383,000 jobs, while the rest of the economy has added nearly three million jobs.
Late yesterday afternoon, Bank of America said it would lay off 3,000 people across the company and has replaced the head of its investment banking division.
Providing that all of this is true, and I can't see why these numbers and well respected sources would lie, things are not that great. It is not just media hype. The market is going to keep going south for a good while and we all had better get used to it. I'm not planning to move anytime soon!!
7 Comments on Great News - Not
Rich - the hubby and I have been talking about buying a bigger house. And it's real tempting. The only problem is that makes us responsible for 6 mortgages if we keep the one we're in and rent it out. I'm afraid of that much 'outgo' in this market. So we have decided that early next summer we will re-evaluate the need for a bigger house and take it from there. Maybe by then I can sell off a couple of these rentals and not feel so stretched out. And right now the highest rate we are paying (on a non owner occ) is 7.5%. So I don't want to upset the apple cart too much.
I don't feel like this downward spiral is near the end. And you won't convince me that the economy is strong, either! It stinks! I do tend to believe the statements from the bank, the investment managers and the accountant. And those statements have not been all that positive lately!
Very nice, comprehensive summary of what's going on in the market. My husband was telling me today that it didn't seem as bad as he had originally thought, and I said, "You have got to be kidding." It seems much worse to me, but then he's the ever optimist and I'm the pessimist.
You know you will receive few comments, and people will call you a naysayer for telling it like it is.....regrettably, I was lambasted for previously saying that this downturn would last a minimum of another 2 years to unravel, and I was told I was only feeding the fire....wish I were wrong, but for all of the reasons you've indicated, and we saw two years ago, this is going to be an extremely rough cycle.
Like Fran....I'm the forever optimist, yet I've thrown that out the window for reality....
Carol - I hear you. There are some great properties available at great prices right now. I have always been very cautious about buying too. Sounds like you have good interest rates too. I'm telling people not to sell now unless they have to.
Fran - Thanks for the pat on the back. Much of this information needs to credited to the NYT writers noted. I beleive it though.
Bill - I've been called worse. I have been talking with my bank clients and spent a week at the 5 Star Default Conference in Dallas about 6 weeks ago. Most of the loan servicers that were presenting there were talking 2009 - 2010 recovery.
in realtion to th case shillers index, the Columbus MSA tends to preceed changes in the national picture by 6 months, meaning we jump the gun are ahead of the curve, pick your colorfull term and insert in there,lol
what I am getting at is, the Columbus MSA will emerge before the national one, while this MSA tends not to have the badfare and big numbers of the national picture, some buying momentum would be a nice thing
maybe the catalist could be a few out od ststae investors who beginn feeding?........?
I have been countering all the hype I hear about the economy looking good, because it just isn't so! Consumer spending up 3% is a good thing? Well, not when it's up because the prices of everything we need is up 5-10%! NAR is real good about trying to get us to counter media reports about the market being down, because they want to "spin" it and make people feel (flasely) confident and go ahead and buy or sell. I can't blame them- we pay them good money every year to help keep our business going strong.
The problem is that most people believe what they hear on the news, without question. Few people look at things deeper than they appear. I feel like WE ALL have to help educate people, so they can make informed decisions, not just try to sell houses when the buyers may be better off waiting and getting credit/financing issues ironed out first.
It's going to get lots worse, in my opinion. While I sell REO/Foreclosures, I take no joy in seeing others so devastated by what the economy is doing. I may be able to keep paying my mortgage, God willing, but I still feel terrible for all those who can't...
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Rich Kruse
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Rich - the hubby and I have been talking about buying a bigger house. And it's real tempting. The only problem is that makes us responsible for 6 mortgages if we keep the one we're in and rent it out. I'm afraid of that much 'outgo' in this market. So we have decided that early next summer we will re-evaluate the need for a bigger house and take it from there. Maybe by then I can sell off a couple of these rentals and not feel so stretched out. And right now the highest rate we are paying (on a non owner occ) is 7.5%. So I don't want to upset the apple cart too much.
I don't feel like this downward spiral is near the end. And you won't convince me that the economy is strong, either! It stinks! I do tend to believe the statements from the bank, the investment managers and the accountant. And those statements have not been all that positive lately!