One thing that tempers my pessimism, though, is this:
Regardless of how many mortgages "fail," people have to find a place to live anyway. It's not as if we're dealing with a system of 100 families, where 10 have been foreclosed out of their homes and we now have 90 families living in 100 homes. There's still a need for those 10 "extra" homes, though not at the prices they were at before the foreclosures.
I think we're going to end up in a situation where the family that walks away from a $500,000 mortgage is going to end up living in a $250,000 home (probably as renters for a while), and the home with that $500,000 mortgage will be sold for $375,000 . . . or maybe occupied by renters whose monthly rent is comparable to the carrying cost of a home with a $375,000 mortgage.
Am I missing something here?
One thing you’re missing is that many of these properties stand empty for extended periods and the idiotic mortgage-holders don’t bother to maintain them.
So a property loses $100,000 of “real” value in a few months in addition to the hundreds of thousands in phony value they have lost.
“Regardless of how many mortgages “fail,” people have to find a place to live anyway.”
In my area, we are seeing multiple families living under the same roof.
It's getting worse," Egan says. "There are some statistics from the National Association of Realtors, and they track the supply of housing units on the market. And that's grown from 2.2 million units about three years ago, up to 4.5 million units earlier this year. So you have the massive supply out there of units that need to be sold."
"The same craziness that occurred in the mortgage market occurred in the commercial real estate markets. And that's taking a little longer to show. But there are gonna be big losses there. Credit cars, auto loans. You name it. So, we're still, you know, we're maybe halfway through the mortgage bubble. But we may only be in the third inning of the overall bursting of this asset bubble," Tilson says.
Make that latter number 200,000 , and you'll see why the administration would rather just monetize the debt ,inflating the currency enough so that the 25 % of mortgagees with underwater loans won't have to mail their keys to the bank.
Not only is new home construction virtually dead, but we have millions of homes instrinsically worth less than it cost to build them..Happy days..
Good thoughts.
Unfortunately, banks aren’t selling off foreclosed properties at rational market rates to get them occupied again.
They are sitting on them, asking excessive prices, hoping for federal billions to bail them out. If they were to sell, they guarantee a big loss, and have no hope of getting the bailout bucks.
People who who "walk away" from a mortgage won't be qualifying for a new one anytime soon after that; there is going to be a massive increase in unsold inventory--which is already staggering--and builders like DR Horton & Beezer will continue to flounder
It needed to happen though
1) A lot of the homes that were purchased near the top end of the bubble were never occupied: speculators buying multiple investment properties that they didn't have time to flip.
2) People who can no longer afford their homes are not moving into rental homes: they are moving into smaller apartments, or sharing with roommates, or moving back in with family.
Even if we eliminated homelessness there is probably an oversupply of places to live. We lost some illegals over the past couple years that were filling up some of the places as well.
It is certainly not a 1 to 1 ratio for occupying houses.
In my area, there have been lots of lay-offs and plant closures,
and there are few prospects for any new jobs.
The company I work for is laying off staff at an alarming rate.
The demand for homes has decreased, and there are many families
that are beginning to “double up”.
My 60 year old brother is moving in with our elderly mother.
My 25 year old son, his wife, and my grandkids have moved in with me.
If you want to move to find work somewhere else,
you can not sell your existing home
because there are no buyers anywhere in sight.
There are many homes in my area that just stand empty.
I’m so glad I paid off my house this last summer. Was that God intervening in my life or my children just pushing me to get it done since I had the last 6,000 dollars?
That's part of the problem -- seems like nobody's building modest sized homes anymore. Try to find a builder specializing in modest 3 bedroom 2 bath 12-1400 square foot homes.... virtually impossible. Everybody was building McMansions, or, if they were doing 3br/2ba, were outfitting them so lavishly that the prices were out of reach for most folks.