The Gulf oil spill and other issues - e.g., what's going to happen to Gary Coleman's body - have seized the main stream media's attention and there continues to be too little attention being paid to the continue free fall in the U. S. housing market. Foreclosures continue at record levels, prices continue to fall as comparables are driven lower by foreclosed properties and programs to assist homeowners who are underwater on their mortgages continue to be largely a farce. Don't believe me on the latter? Try working with Bank of America, Wells Fargo or another big lender and see where you get - typically nowhere. Loss mitigation and loan modification personnel are generally both incompetent and unresponsive. Ditto for management companies managing/marketing bank owned properties where personnel appear to know little or nothing about how to get a real estate closing done. Equally distressing is the fact that no relief seems to be in sight as many sit and wait rather than buy because they fear prices may fall further. Add to that the difficulty investors and rehabbers are experiencing in securing financing and it's a recipe for more disaster. For going on three years I have said that until housing recovers, there will be no true economic recovery. Lenders created the problem and now they are about to make it even worse. Washington doesn't seem to get this simple fact. Here are some highlights from Money Morning that look at this bleak picture:*
Here's the problem. While the "headline" numbers - the summary statistics we cited above - appeared to portray an improving market, a look beneath the surface reveals those worrisome undercurrents.
*
Consider, for example, the statistics for actual bank repossessions. Those hit a record of 93,777 properties in May - a 1% increase over April's record and a whopping 44% up from the same month a year ago.
*
In spite of the record number of repossessions we've seen by banks and mortgage-service firms recently, millions of delinquent loans are still on banks' books and in mortgage pools. Banks, unwilling to take more write-downs or to incur the high cost of maintaining repossessed homes, have hidden behind federal and state government-foreclosure moratoriums and a host of modification programs designed to keep borrowers in their homes.
*
But this desperate tactic - known by industry insiders as "delay and pray" (or sometimes as "extend and pretend") - may have finally run its course in the U.S. housing market.
*
Instead of having a market in which U.S. housing prices are firming and heading higher, the expiration of the homebuyer-tax credit, stubbornly high unemployment, restrictive mortgage underwriting standards and a growing overhang of unsold properties is putting more downward pressure on home prices. Banks are realizing that the hoped-for "bounce" isn't coming and are beginning to take back more properties so they can unload them for as much as they can get before prices decline even more.
*
Here's the truly frightening question: What will happen to U.S. housing market prices when foreclosures catch up with delinquent borrowers and the greater-than-50% of modified loans that are now re-defaulting? Once foreclosures are completed and titles to repossessed homes are in the hands of banks and mortgage servicers, they have no other option but to unload their unwanted inventory as fast a possible.
*
[W]hile a situation can always change, it's unlikely that the growing wave of repossessions will have anything other than a negative impact on the value of the nation's housing stock, its banks, its economy and the U.S. stock market.
No comments:
Post a Comment