Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Monday, January 30, 2006
Massachusetts Defaults At 12 Year High
Kimberly Blanton at the Boston Globe has this update on the housing bubble. "The number of foreclosure notices filed against Massachusetts homeowners last year reached their highest level since the housing bust of the early 1990s, as homeowners fell behind on their mortgages and lenders began the process of taking back the properties."
"Paradoxically, the sudden halt to sharply rising home prices put a squeeze on many borrowers. Homeowners were less able to refinance their loans at more attractive rates, or sell and pay off their debts, because the value of their homes fell or remained flat."
"'There's an epidemic of foreclosures,' said Boston lawyer Gary Klein, who represents borrowers in lawsuits against lenders. 'We're getting a steady stream of referrals of people who are looking for any option to save their home.'"
"The biggest spikes last year occurred in Essex County, north of Boston (up 48 percent), Barnstable County on Cape Cod (47 percent), Suffolk County (45 percent), and Bristol County (44 percent). 'People can't pay their mortgage,' said Juan Ortega, a real estate agent in Lawrence in Essex County. 'They're up to the top. They bought very high, and now they can't make the mortgages.'"
"In the winter of 2004, Susan Chamberlain lost her part-time job as an IRS tax examiner. She recently was rehired, full time, but that earlier layoff precipitated a November foreclosure filing. She and her husband initially purchased their Lawrence home for $158,000 in the spring of 2001 with US Veterans Affairs financing. In December 2002, they refinanced and withdrew some money to pay off a car and some bills, bringing their mortgage debt to $206,000."
"The interest rate on the new mortgage was variable, initially averaging 9 percent but rising since then. With the Veterans Affairs loan, the Chamberlains paid $1,200 a month on their mortgage; their current monthly payment is $1,900."
"In the Boston area, house prices are so high, Klein said, that mortgages consume a growing share of monthly take-home pay. 'It used to be, if you lost a job you'd be at risk of losing the house,' he said. 'Now, if you lose overtime, many families are so close to the brink, and that can create problems.'"
Thanks to all the readers who sent this link in.
ReplyDelete"Boston prices so high". This in a nutshell is why I have a white hot hatred of all residential real estate speculators, including the trolls who post on this blog claiming $10M portfolios, etc. Housing is a basic need of all people and to force prices up without regard to underlying fundamentals purely out of greed and "me first-ism" is a karmic crime of the highest order, IMO. I know I sound a little wiggy here as I am in the high end bracket myself but I get enraged every time I read this stuff.
ReplyDelete'People can't pay their mortgage,' said Juan Ortega, a real estate agent in Lawrence in Essex County. 'They're up to the top. They bought very high, and now they can't make the mortgages.'
ReplyDeleteThe music has finally stopped and there are only a couple of chairs. Silence is golden...
If my wages were dropping and I hear about the easy money in real estate I might be more likely than someone with growing income to buy into the bubble.
ReplyDeleteIn other words, poor and middle class people are more afraid of being left behind by eternally appreciating home prices. There is no way this can't end badly.
Regarding the comment "The music has finally stopped and there are only a couple of chairs. Silence is golden..."
ReplyDeleteIt sounds like some people look forward to increases in foreclosures...to people getting thrown out on the street...to people losing their life savings.
But the vast majority of people who would be hurt in a housing collapse would be innocent victims by any standard.
The folks holding 3 condos waiting to flip can kiss my ass. But the family that buys at the top because the world is chanting "buy, buy, buy," is facing true tragedy.
"Housing is not just a commodity like gold or stocks. It is a basic human need."
ReplyDeleteWelcome to capitalism.
People and the corporations they run, build houses for profit. The bread you ate today was made from wheat grown by a farmer who wanted $$$$ not "karmic" goodness. We'd have far fewer doctors if the market place didn't reward them with outrageous salaries.
The profit motive allows 300 million heterogeneous Americans to live in a society that works pretty well.
Glenn said...
ReplyDeleteRegarding the comment "The music has finally stopped and there are only a couple of chairs. Silence is golden..."
It sounds like some people look forward to increases in foreclosures...to people getting thrown out on the street...to people losing their life savings.
But the vast majority of people who would be hurt in a housing collapse would be innocent victims by any standard.
The folks holding 3 condos waiting to flip can kiss my ass. But the family that buys at the top because the world is chanting "buy, buy, buy," is facing true tragedy.
I have followed this blog for quite some time. As a conservative investor and engineer, I believe in saving 20% for a DP and having the income to pay my mortgage and accumulate savings. Call me old-school if you'd like. Many on this blog have been ridiculed in the past for predicting precisely what is happening now in the market. Kudos to them.
I have no sympathy for flippers either. Regarding the 'innocent victims', I find it hard to believe that they didn't succumb to greed and buy at the top with a 100% IO neg-am in hopes of making an 'easy' killing. Heck, they could have easily rented a comparable home from a flipper at 1/2 of their current mortage payment.
Now it is obvious the music has stopped and the piper needs to be paid. I say: Let the games begin.
Silence is truly golden.
Did you have a "white hot hatred" of the people who chased the worthless dot-coms. This resulted in widespread pain. A lot of ordinary people who have no knowledge or experience jumped on the real estate bandwagon over the past few years. Do you hate them too?
ReplyDeleteI never hated stock market speculators. I loath and detest real estate speculators. You should to. When the stock market inflates due to speculation, regular average people aren't hurt. Same when the bubble bursts. Real estate speculators, OTOH, drive up housing costs for everyone. From the very wealthiest to the poorest of us, we all get shafted by the real estate speculators.
Vainvestor,
ReplyDeleteI am beginning to think that you are a Troll.
Does anyone here agree with this?
Gotta love those Canadians! :)
ReplyDeletevainvestor:
ReplyDeleteNo, I do not have a "white hot" hatred of people who chased dot coms for the reason I stated. Those were speculations and you could not make an argument in any way, shape or form that they were not. I myself traded them and they are what enabled me to quit paid employment and trade for a living.
OTOH, housing is a basic human necessity and activities such as yours have created artificial pricing pressure which causes a ripple effect all the way across the spectrum. Builders build for the "high end" because that is where the the high profit margins and truly stupid money are. Middle class people who are not financially sophisticated and do not have knowledge of boom and bust/business cycles feel pressured to step in because they are afraid they will never be able to if they don't. The lower end is completely ignored, viz the "essential" workers, such as teachers, policemen and firemen who cannot afford to live in the cities they serve. All in the name of obscene profits for people like you who are never happy with what they have and always have some straw man they have to overcome in order to feel like they are masters of the universe. To put it very bluntly, you people make me sick to my stomach. Sorry, this is my hot button. What are you giving back of the obscene wealth you have accumulated in this artificial demand market (if you really have, which I don't really believe).
And before you ask me the same question, I will tell you that I give away over half of what I make. Unfortunately for me, I'm one of those kookoids who feel guilty about having too much money and cannot get rid of it fast enough.
Don't feed the trolls.
ReplyDeleteParadoxically, the sudden halt to sharply rising home prices put a squeeze on many borrowers.
ReplyDelete"Paradoxically"? What's so paradoxical about it? If you refinance to get cash out to pay your mortgage, well, duh