A Second Mortgage Meltdown?

Posted by Andrew Syrios in SwiftEconomics.com

As we all know, the recession is over. Joe Biden told us so. Ben Bernanke said the same. Obama’s chief economic officer Lawrence Summers even said “everybody agrees that the recession is over.” (1) Honestly, how could anyone disagree? After all, the Dow Jones is up almost 50% over the last year and we only lost 36,000 jobs last quarter, which is apparently great.

So we’ve had a jobless recovery because our economy grew 2.2% last quarter. Unfortunately, as Anthony Randazzo points out in Reason Magazine, most of that “growth” is based on temporary government programs:

“Consider that 37 percent of the third-quarter GDP growth was due to motor vehicle purchases, which were stimulated almost entirely by the Cash for Clunkers program… Another 20 percent of third-quarter GDP growth came from new residential investments, propped up largely by the First-Time Homebuyer Credit… Overall, government support accounts for roughly 77 percent of economic growth in the third quarter of 2009, according to my analysis of Commerce Department statistics. This means that non-Washington GDP growth was closer to 0.34 percent from July to September 2009, instead of 2.2 percent.” (2)

He concludes, “This is not real growth. It’s the national equivalent of a credit-card buying spree, with the bills—in the form of debt service and unfunded liabilities—to be paid off later. It is a faux recovery.”

Housing Double Dip a Done Deal

Everybody take a nice long look at today’s Pending Home Sales Index from the National Association of Realtors, because it’s just about the last positive picture we’re going to see for a while.

Yes, the index rose even more than expected, as buyers rushed in to take advantage of the home buyer tax credit.

And yes, those numbers will show up in Existing Home Sales in May and June, but then look out.

Mortgage Crisis Creating Drag on Economic Recovery

The mortgage crisis is dragging on the economic recovery as more homeowners fall behind on their payments.

Analysts expect improvement soon, but the number of homeowners in default or at risk of foreclosure will have a lingering effect on the broader economy.

More than 10 percent of homeowners had missed at least one mortgage payment in the January-March period, the Mortgage Bankers Association said Wednesday.

Trend of US Mortgages ‘Underwater’ Grows

A growing percentage of U.S. homeowners were saddled with “underwater mortgages” in the first quarter, accounting for almost one in four homes in a trend that poses a serious threat to the housing market’s recovery, real estate website Zillow.com said on Monday.

U.S. home values also declined again in the first quarter, Zillow reported.

Homeowners with “underwater” mortgages—where the amount owed on the mortgage exceeds the value of the home—are more prone to defaults and foreclosures.

First-Time Homebuyers Account For Record Share Of Home Sales

Late stage foreclosures pushed filing figures higher in the opening quarter, suggesting that banks may be chipping away at distressed properties clogging the system. US housing prices continued their downward trajectory, while the strong presence of first-time buyers in March provided some steam to a mostly tepid recovery. See the following article from Property Wire for more on this.

Recent talk of a recovery in the US real estate market has been dealt a blow by the latest figures that show foreclosures still rising and prices falling.

Foreclosure filings including default notices, scheduled auctions and bank repossessions rose 7% in the first quarter of 2010 compared with the last three months of 2009, the most recent figures from RealtyTrac show.

Some 932,234 properties, or one in every 138 US housing units, received filings. During March alone, 367,056 properties received filings, 19% more than in February and 8% more than the same time last year.

Foreclosures Are Rising

The new foreclosure wave is here.

Yes, banks are ramping up loan modifications and ramping up short sales and ramping up deeds in lieu of foreclosure, but the plain fact is that as the systems are oiled, the loans are moving through faster, and the pig in the python is showing its face.

NATIONAL FORECLOSURE PROBLEM: We’re in the EYE of the Hurricane!

The graph shows that we are largely through sub prime loan defaults (in purple), only to face a tidal wave of option ARMs recasts and likely defaults (in blue). Bottom-line: Short sales are here to stay!

Record 19 Million U.S. Homes Stood Vacant by 2009

A record 19 million U.S. homes stood empty at the end of 2008 and homeownership fell to an eight-year low as banks seized homes faster than they could sell them.

Bend mortgage defaults spike to record level

BEND, Ore. (AP) - There were 402 notices of default recorded in Deschutes County last month, the most since the housing crisis began three years ago, according to the Deschutes County Clerk’s Office.

The number increased by nearly 26 percent from the 320 default notices recorded in December 2009, and more than 95 percent from the 206 notices recorded in January 2009.

The increase was a surprise, at least compared with data from the prior quarter that showed the filing rate was declining.

In the final quarter of 2009, the number of notices of default filed during the period decreased on a quarterly basis for the first time in 12 consecutive quarters, or since the third quarter of 2006.

1 in 4 Mortgages ‘Underwater’

Report shows 10.7 million borrowers are stuck with homes worth less than the mortgages they owe.

NEW YORK (CNNMoney.com) — In a sign that more foreclosures could be on the horizon, 23% of people with mortgages owe more than their home is worth, according to a report released Tuesday.

Almost 10.7 million U.S. mortgages were “underwater” as of September, said research firm First American CoreLogic.

Another 2.3 million homeowners are within 5% of negative territory, the report said. The two figures combined comprise almost 28% of all residential properties with mortgages.