Foreclosures are on the rise. Here’s what that says about the housing market

[Casey Jones]

Interesting that the only time in that chart it hit 100 was during the Trump years.

Another reason Trump had to be destroyed.

I recently read a theory - lost the link - of how, the urban hellish ghettos of the 19th Century were probably NOT accidental, but a sadistic response by the Power Elites of the day, seeing how Industrialization suddenly lifted the potential lifestyle of the former peon class.

They are vicious. People are vicious; and much as they'd like to pretend to be something higher, the Power Elites have their bad breath and constipation like any other hominid. So they take it out on those who they think are under their thumbs.

Trump, having grown up in a working-class world, remembered his roots. And did the best job he could. THAT COULD NOT BE LEFT TO BE.

 

[Fiat Metaler]

Well some of the factors that had me bullish are starting to turn.

Mortgage rates are now above 6%. I didn't expect them to get so high or stay so high for so long.

In turn, affordability is now at record lows. When this thread was started, affordability was still average.

Yet, I'm not seeing housing prices decline. Even though demand is softening and lumber prices are coming down, other inputs remain high.

I'm not seeing prices come down. Sure, there are always a small percentage of folks who price their houses aggressively and then after a few weeks on the market will reduce the asking price to where they should have listed in the first place. But days on market and inventory remain low in most places.

Just calling it like I see it.

I think medium to long term nominal housing prices will be steady or up. Supply is limited and inflation will continue to run. Whether prices come down in the short term depends on interest rates.

 

[EO 11110]

Well some of the factors that had me bullish are starting to turn.

Mortgage rates are now above 6%. I didn't expect them to get so high or stay so high for so long.

In turn, affordability is now at record lows. When this thread was started, affordability was still average.

Yet, I'm not seeing housing prices decline. Even though demand is softening and lumber prices are coming down, other inputs remain high.

I'm not seeing prices come down. Sure, there are always a small percentage of folks who price their houses aggressively and then after a few weeks on the market will reduce the asking price to where they should have listed in the first place. But days on market and inventory remain low in most places.

Just calling it like I see it.

I think medium to long term nominal housing prices will be steady or up. Supply is limited and inflation will continue to run. Whether prices come down in the short term depends on interest rates.

imo, it all depends on recession. recession is what i've been forecasting, thus housing gets hurt. i'm sticking with it

on your side - you have the UK properties - canada, england, australia - which have the blackrock model of sky high prices and low availability long term. US is moving that direction

 

[Goldbrix]

There were moratoriums on both and now both are expired

Far too many decided to take the "Free" time off and not pay at all. Well, Playtime is over, Pay Up or Get Out!
Sometimes I can see why politicians, banksters, Big Pharma, et al. treat the masses as sheep.
Because they act like sheep.

 

[Goldbrix]

I tend to agree with this. Americans are used to living beyond their means. The central bankers and the Fed have been hard at work getting them accustomed to it since 1913.

For so many Americans, being overextended is going to be a hard (and painful) habit to break!

That is what .Gov and Banksters want in a DEBT Based economy.

 

[Fiat Metaler]

I'm less focussed on a recession than supply/demand and rates.

Of course in a recession some people will lose their jobs and that will impact demand.

But demand is considerable relative to supply so there is a buffer, and the recession has been expected for several years now.

In 2006-8, the recession was sudden and severe. There were many instances of two income households where both lost their jobs. You also had people far more overextended buying multiple houses on spec. Those factors are not present now and instead there is a labor shortage so dislocations will be temporary.

 

[Thecrensh]

I'm less focussed on a recession than supply/demand and rates.

Of course in a recession some people will lose their jobs and that will impact demand.

But demand is considerable relative to supply so there is a buffer, and the recession has been expected for several years now.

In 2006-8, the recession was sudden and severe. There were many instances of two income households where both lost their jobs. You also had people far more overextended buying multiple houses on spec. Those factors are not present now and instead there is a labor shortage so dislocations will be temporary.

Wasn't the sudden nature of 2006-2008 due to ALL the major financial institutions being way over leveraged? I believe that now they have been piling up cash reserves and seem to be in a better place to weather any impending storm. Hopefully it won't crush the avg joe but we all know who takes the brunt of these events.

 

[BackwardsEngineeer]

ok, the housing market is at cedar point, lake erie to your left, canada in the distance.... we have been cranking this up for 10 years and are at my favorite point in the ride. Those few seconds you just kinda hang at the top..

 

[Fiat Metaler]

Wasn't the sudden nature of 2006-2008 due to ALL the major financial institutions being way over leveraged? I believe that now they have been piling up cash reserves and seem to be in a better place to weather any impending storm. Hopefully it won't crush the avg joe but we all know who takes the brunt of these events.

Well there were a lot of causes of the crisis, but it began with people losing their jobs and being underwater on houses.

I worked for a large regional bank at the time, about 200B in assets. There are a handful of money center banks that are larger, 5-10x, but most banks are smaller. The average bank with a half dozen branches might be 2B in assets by comparison.

All banks are leveraged, they are financial institutions afer all. They way they calculate leverage is complicated - the Basel rules- but basically its around 10:1. Most banks didn't own many mortgages at the time of the crisis - they would originate mortgages and sell them to Fannie and Freddie who issue mortgage backed securities (MBS), and the banks might have had those. But you also had non-banks like Countrywide who owned mortgages and investment banks like Lehman who were doing crazy stuff like selling credit default swaps (CDS) on MBS and were leveraged 30-1 or higher.

Just looking at regular banks, if they operate at a profit it increases their capital and reduces leverage, except to the extent they return capital by buying back shares or paying dividends. If they operate at a loss, it erodes capital thereby increasing leverage. So yeah you are right but other than the Lehmans and a few other casinos the leverage wasn't intentional but rather a result of operating losses due to the economy and in turn housing. One thing that happened during the that crisis which was unprecendented is that people mailed in their keys; in the past, people stiffed every other creditor besides their mortgage lender in order to keep their houses, but this time they did the opposite. Also, banks don't usually recognize a mortgage as a loss for 180 days because there is a chance that the borrower will get current, but when they mail you the keys because both borrowers have lost their job and they owe more than the house is worth, you have to accelerate the recognition of the loss on that loan.

As the economy faltered, housing faltered. This triggered losses in loan portfolios which reduced profits or turned them to losses, which increased leverage. The only way to reduce leverage at that point is to sell assets to trigger gains or raise capital under bad market conditions. Banks that could did. Banks that couldn't went out of business. Non-bank lenders who don't take deposits but instead got capital from the wholesale markets by issuing debt found that they couldn't raise capital when times got tough. Wachovia, which was really the former First Union, was actually a bank but they had bought a West Coast bank that issued a bunch of risky non-conforming loans which by definition they couldn't pass on to Fannie or Freddie; those losses were stuck in the bank's portfolio and the market knew that, and that prevented Wachovia from raising enough capital to survive (they got bought by Wells Fargo and Wells - which once had a AAA credit rating - has been a turd ever since).

So in my opinion the real cause was the recession. Remember, in 2008 the Nasdaq fell 40%. (Silver went from about $6 in 2006 to $50 in 2010 or 2011.) There were losses and layoffs all across the economy. It was these losses, more so than housing, that reduced bank operating profits and reduced bank capital creating the over-leveraged situation. I say that because most banks had far more loans, and far bigger losses, in the rest of their portfolio than in housing becuase as a general rule most banks don't keep their mortgages but maybe have a 45 day inventory pending sale to Fannie and Freddie. There are exceptions of course but these are fairly narrow.

 

[BackwardsEngineeer]

Well ok, todays coaching was to buyer agents... it was conversations around encouraging buyers to step up, pay todays prices and wait for it.... set yourself up for tomorrows re-fi into lower rates. Re-fi's are simple, easy, and almost always costs can just be rolled into your existing mortgage. I respect the speaker a lot, but the industries desire to keep the ball rolling at any cost is scary. The ever expanding, all encompassing business model is going to take everything down.. but with 95 degree heat AEP promises to get power back to mid Ohio by Friday.

On another RE note, new home agent stopped by the pool today and shared that getting buyers qualified is beginning to kill their business. Homes sold and buyers qualified seven months ago, are failing at the closing gate. 500k buyers are now 375k buyers... problem is there are no new 375k homes... they sold their old place to get in line for a new place. Now they got no place. So, silly me asks, who is going to buy the 500k place? Agent, we just pray for another ex northeaster to blow into town... Me, sounds like a thin plan.... Agent, guess its better than no plan

 

[Fiat Metaler]

^^^
I think the refi logic is sound if you assume rates will come down.

But it reeks of desperation. I think you are going to see a bifurcation in the market - the low end may continue to rise and luxury homes continue to rise and homes in the middle stagnate.

Housing prices increased in advance of wages, and wages haven't come close to catching up yet.

 

[BackwardsEngineeer]

Fiat,
I've worked with a lot of estate situations. Current valuations of high level homes, the really rare places that only come to market once in a lifetime, best locations, lot sizes, views, dock, etc many have not seen the market since the 50's passed from parents to children, some many times. This is the first generation, that in many cases cannot afford those properties, so as those parents get close to the end the children have a keen eye toward selling at the revamped value. Combination of a multitude of impossibilities, created in food, air, pharmaceutical, and .gov has more seniors in line for the exit simultaneously over the next five than any projection could anticipate. Settling those estates will send all these properties, stocks, rolex watches, fancy paintings, high end cars, expensive toys to market by people who have zero sweat equity in the acquisition. No involvement = just show me the money. Sell they will. so who is going to buy? Foreigners? Corporations? Robber barons?

We've tapped out mid class america on this go round.. price is dictated by bidders but enjoyed by the sellers. Those wanting to buy those places will have to find a buyers for there's, and afraid financing for the rest..

 

[Thecrensh]

Fiat,
I've worked with a lot of estate situations. Current valuations of high level homes, the really rare places that only come to market once in a lifetime, best locations, lot sizes, views, dock, etc many have not seen the market since the 50's passed from parents to children, some many times. This is the first generation, that in many cases cannot afford those properties, so as those parents get close to the end the children have a keen eye toward selling at the revamped value. Combination of a multitude of impossibilities, created in food, air, pharmaceutical, and .gov has more seniors in line for the exit simultaneously over the next five than any projection could anticipate. Settling those estates will send all these properties, stocks, rolex watches, fancy paintings, high end cars, expensive toys to market by people who have zero sweat equity in the acquisition. No involvement = just show me the money. Sell they will. so who is going to buy? Foreigners? Corporations? Robber barons?

We've tapped out mid class america on this go round.. price is dictated by bidders but enjoyed by the sellers. Those wanting to buy those places will have to find a buyers for there's, and afraid financing for the rest..

I wonder if the buyers aren't interested in selling but rather renting/leasing as their property values perpetually increase? "you'll own nothing and be happy" mindset.

 

[Lancers32]

I keep hearing locally that due to a limited supply and people continuing to move in that prices can't fall significantly.

 

[hammerhead]

I wonder if the buyers aren't interested in selling but rather renting/leasing as their property values perpetually increase? "you'll own nothing and be happy" mindset.

I wonder what the properties will become when the value drops.

 

[BackwardsEngineeer]

I wonder if the buyers aren't interested in selling but rather renting/leasing as their property values perpetually increase? "you'll own nothing and be happy" mindset.

The guy who bought two doors down had person offer him 230k over what he had paid 9 months earlier for his former place. He turned them down flat. As he told me the story, my no poker face clearly indicated I thought he was nuts. He says, what would you have done? Me, I would have taken the cash...

 

[Voodoo]

Well ok, todays coaching was to buyer agents... it was conversations around encouraging buyers to step up, pay todays prices and wait for it.... set yourself up for tomorrows re-fi into lower rates. Re-fi's are simple, easy, and almost always costs can just be rolled into your existing mortgage. I respect the speaker a lot, but the industries desire to keep the ball rolling at any cost is scary. The ever expanding, all encompassing business model is going to take everything down.. but with 95 degree heat AEP promises to get power back to mid Ohio by Friday.

On another RE note, new home agent stopped by the pool today and shared that getting buyers qualified is beginning to kill their business. Homes sold and buyers qualified seven months ago, are failing at the closing gate. 500k buyers are now 375k buyers... problem is there are no new 375k homes... they sold their old place to get in line for a new place. Now they got no place. So, silly me asks, who is going to buy the 500k place? Agent, we just pray for another ex northeaster to blow into town... Me, sounds like a thin plan.... Agent, guess its better than no plan

Let me guess... that was sponsored by the NAR or state Association? I really despise them.

Like I said a long time ago... a rise in rates means a drop in value. Many have noted that a 1% rise in rates is roughly a 10% drop in buying power (and value when everyone needs a loan). A 3% rise means 30% which drops your 500k to 350-375k. He doesn't know it yet but THAT house is a ~375k house. The strategy is to upgrade a few things and drop the price first to attract a higher income buyer.

 

[Voodoo]

^^^
I think the refi logic is sound if you assume rates will come down.

But it reeks of desperation. I think you are going to see a bifurcation in the market - the low end may continue to rise and luxury homes continue to rise and homes in the middle stagnate.

Housing prices increased in advance of wages, and wages haven't come close to catching up yet.

Disagree. The low end came up the most and will likely suffer more than others.

 

[Voodoo]

Fiat,
I've worked with a lot of estate situations. Current valuations of high level homes, the really rare places that only come to market once in a lifetime, best locations, lot sizes, views, dock, etc many have not seen the market since the 50's passed from parents to children, some many times. This is the first generation, that in many cases cannot afford those properties, so as those parents get close to the end the children have a keen eye toward selling at the revamped value. Combination of a multitude of impossibilities, created in food, air, pharmaceutical, and .gov has more seniors in line for the exit simultaneously over the next five than any projection could anticipate. Settling those estates will send all these properties, stocks, rolex watches, fancy paintings, high end cars, expensive toys to market by people who have zero sweat equity in the acquisition. No involvement = just show me the money. Sell they will. so who is going to buy? Foreigners? Corporations? Robber barons?

We've tapped out mid class america on this go round.. price is dictated by bidders but enjoyed by the sellers. Those wanting to buy those places will have to find a buyers for there's, and afraid financing for the rest..

I'll be buying... if ya all don't mind a little pond scum on your money.

 

[viking]

If the housing market crashes, is it wise to ask tax accessors to revalue property?

I think my property may already be undervalued (not keeping up with latest run-ups), so maybe that would stir up a nest I don’t wish to do?

 

[Lancers32]

If the housing market crashes, is it wise to ask tax accessors to revalue property?

I think my property may already be undervalued (not keeping up with latest run-ups), so maybe that would stir up a nest I don’t wish to do?

I guess that depends on how hungry your local municipality is. I was able to appeal my last tax bill two years ago and they agreed to leave the assessment close to where it was. If they didn't raise the prop tax bill I would leave it be.

 

[EO 11110]

If the housing market crashes, is it wise to ask tax accessors to revalue property?

I think my property may already be undervalued (not keeping up with latest run-ups), so maybe that would stir up a nest I don’t wish to do?

only do that if you think your assessment is higher than market

 

[Casey Jones]

If the housing market crashes, is it wise to ask tax accessors to revalue property?

I think my property may already be undervalued (not keeping up with latest run-ups), so maybe that would stir up a nest I don’t wish to do?

Remember, even in a crash, we're looking at roughly 20-percent inflation.

I'd be ASTOUNDED if prices actually fall, except in odd pockets. It's just that they'll hold steady while the prices of everything else explode around them.

 

[Lancers32]

Remember, even in a crash, we're looking at roughly 20-percent inflation.

I'd be ASTOUNDED if prices actually fall, except in odd pockets. It's just that they'll hold steady while the prices of everything else explode around them.

You think? Enough people lose their jobs and walk away from their payments how can prices hold steady?

 

[Casey Jones]

You think? Enough people lose their jobs and walk away from their payments how can prices hold steady?

Black Crock will be there, with enough newly-printed money, to serve as a "price buffer."

And other Vulture Capital firms, and eventually the Chin, will be in there.

The concept is "stagflation." Prices rise, not from increased demand, but because the currency has been so-quickly debased. So they keep on going up, even as no one can afford much of anything.

That was the whole of the 1970s. I lived through it.

 

[Lancers32]

Black Crock will be there, with enough newly-printed money, to serve as a "price buffer."

And other Vulture Capital firms, and eventually the Chin, will be in there.

The concept is "stagflation." Prices rise, not from increased demand, but because the currency has been so-quickly debased. So they keep on going up, even as no one can afford much of anything.

That was the whole of the 1970s. I lived through it.

I lived through the '70's myself but the patient is 50 years sicker now.

 

[EO 11110]

I'm less focussed on a recession than supply/demand and rates.

this is part of what will cause the recession -- frbny is clearly targeting demand destruction through higher rates. and mtg rates arent the only ones rising. lots of companies have variable rates that will be resetting higher

the outlook is for those betting on higher prices is grim

 

[BackwardsEngineeer]

Regarding future pricing, we are trying to discuss two different variables at the same time. Dollar destruction vs. asset appreciation. One hand here is saying prices hold not on demand but dollar devaluation. The other hand is saying prices fall due to lack of market or buyer willingness to bid at or higher...

We can chicken and egg this all day long, so long as your horizon is long term an argument can be made that neither matter. However, if you need to sell for any reason or bought at the top and have little equity heaven help you. As rates continue to rise, lenders are going to be doing everything possible to get out of low interest loans. There will be loans called as values drop... something to ponder

 

[Fiat Metaler]

they can play the rate games but inflation was already unleashed. prices are not going lower for most things.

As for who will buy, I don't know. I have two small glimpses though.

I bought where I live now because I wanted to get further away from the peaceful people in the city center and with work-from-home being in close is not necessary. Lots of folks eventually came around to my way of thinking.

The other thing is that the next generation stands to inherit a lot of wealth. There is a divide in this country between rich and poor, and that division is going to get more pronounced as folks leave their propoerty to the next generation. The number of people with what they call "family money" is going to increase substantially in coming years.

 

[BackwardsEngineeer]

Ok... .75 increase, going to raise until they get inflation under control.. no additional comments needed.

 

[Fiat Metaler]

Mortgage rates up close to 6.25% now.

 

[EO 11110]

for the RE bulls -- even if nominal prices dont drop, they are still dropping by the rate of inflation

depending on who you listen to - that's a 9 to 16 percent loss per year -- IF prices stay flat

 

[Uglytruth]

Wasn't the sudden nature of 2006-2008 due to ALL the major financial institutions being way over leveraged? I believe that now they have been piling up cash reserves and seem to be in a better place to weather any impending storm. Hopefully it won't crush the avg joe but we all know who takes the brunt of these events.

Current housing bubble created by printing fiat, giving it away & low rates.
06-08 due to low interest rates.
Low interest rates due to 911 recovery & everyone unqualified deserves a house
911 due to the ds.
Late 90's market was going crazy due to Y2K & everyone shoving money into 401K's because of great returns.
Great returns because everyone was working a lot of hours.
Early 90's there was the 92 slowdown.
Late 80's savings and loan mess because fo thieft.
Key to the S&L crisis was a mismatch of regulations to market conditions, speculation, moral hazard brought about by the combination of taxpayer guarantees along with deregulation, as well as outright corruption and fraud, and the implementation of greatly slackened and broadened lending standards that led desperate banks to take far too much risk balanced by far too little capital on hand.
Early 80's comin goff the 18% Voker interest rates. Had a friend buy a house at 16%!!!!!!!!! Credit was becoming king! CHARGE IT!
Late 70's inflation due to fiat. Lets not forget woman in the workforce helped create stagflation.
Early 70's went off the gold standard because they had to pay for the Vietnam policing action.
Late 60s it was drugs, destruction of the familys & black riots.
Early 60's the killed Kennedy because he wanted to bypass the fed with greenbacks like Lincoln.
Late 40's - 1950's rebuilding after the war. People working & building familys.
You know the rest. Ends at 1913 & the fed........

Sure you can throw some other twists and turns in there. Interest rates, offshoring of manufacturing jobs that stopped the creation of anything including wealth. Businesses that because nothing but a brandname of long lost quality. Zenith anyone? Woman's lib. People not wanting to work. Welfare, DINK (dual income no kids) ME generation, greed generation. Scandle after scandle....... all brought to you by the honest Walter Cronkite every evening on your TV & newspaper. Creating a reality the ds wanted you to believe.

The guy who bought two doors down had person offer him 230k over what he had paid 9 months earlier for his former place. He turned them down flat. As he told me the story, my no poker face clearly indicated I thought he was nuts. He says, what would you have done? Me, I would have taken the cash...

My sister is sitting on 1m + profit & says she likes it there so don't want to move. She works from home!

 

[Lancers32]

Well where would your sister move if she sold?

 

[Voodoo]

Black Crock will be there, with enough newly-printed money, to serve as a "price buffer."

And other Vulture Capital firms, and eventually the Chin, will be in there.

The concept is "stagflation." Prices rise, not from increased demand, but because the currency has been so-quickly debased. So they keep on going up, even as no one can afford much of anything.

That was the whole of the 1970s. I lived through it.

Those idiots are just like regular buyers with more money. They will be more herd like than most and panic and sell many properties, not keep buying.

 

[Voodoo]

Regarding future pricing, we are trying to discuss two different variables at the same time. Dollar destruction vs. asset appreciation. One hand here is saying prices hold not on demand but dollar devaluation. The other hand is saying prices fall due to lack of market or buyer willingness to bid at or higher...

We can chicken and egg this all day long, so long as your horizon is long term an argument can be made that neither matter. However, if you need to sell for any reason or bought at the top and have little equity heaven help you. As rates continue to rise, lenders are going to be doing everything possible to get out of low interest loans. There will be loans called as values drop... something to ponder

They will have to fall first, a lot. I say this because the prices still require most everyone to get a loan to afford the house. Once the dollar falls enough that cash sales become prevalent then perhaps they soar again with the rapidly shrinking value. But we have to see many, many more cash sales first and I think that's a ways away yet.

 

[Lancers32]

Those idiots are just like regular buyers with more money. They will be more herd like than most and panic and sell many properties

Those idiots are just like regular buyers with more money. They will be more herd like than most and panic and sell many properties, not keep buying.

Shareholders see they can get more appreciation in interest rate instruments Blackrock will be forced to dump homes.

 

[BackwardsEngineeer]

UT,
Your sis is in a tough spot, but if you have a mil, there is always someplace to live... problem is we all get used to a cushy existence. Our identity gets wrapped up in where we live and how it appears. I know a guy who drives a 08 accord and lives in a nice 2000 sq ft ranch, went to his place to buy a few salvaged items. We've been friends a long, long time. He opens a small safe and pulls out a tray, revealing the trays underneath. Who could drive a mercedes

 

[Uglytruth]

Well where would your sister move if she sold?

Kids grown. Divorced. Don't even need to live in the US. Go pretty much anywhere. Could probably retire has no debt & I'm sure a plump 401K. Maybe she is wanting to set up the kids. All three won't make what she makes.

 

[Lancers32]

Kids grown. Divorced. Don't even need to live in the US. Go pretty much anywhere. Could probably retire has no debt & I'm sure a plump 401K. Maybe she is wanting to set up the kids. All three won't make what she makes.

She just doesn't want to move. I'm not sure where I would go at this point either.