12% in Foreclosure or Delinquent
By Barry Ritholtz - March 5th, 2009, 10:40AM
Wow, how is that for a data point?
About 5.4 million American homeowners with a mortgage (~12%) were either behind in their payments or already in foreclosure at the end of 2008, according to the Mortgage Bankers Association.
That’s about one in eight households with mortgages (about half of owned homes in the US have mortgaes).
That’s your astonishing data point of the day:
>
Source:
12 pct. are behind on mortgage or in foreclosure
Associated Press
http://news.yahoo.com/s/ap/20090305/ap_on_bi_ge/states_foreclosures
Tweet
Facebook
Reddit
Digg this!
March 5th, 2009 at 10:45 am
that, and U$D 5,25 will get you a latte at SBUX, if you can still find one that’s open..
March 5th, 2009 at 10:55 am
Great point.. and all I hear all day from the “experts” is that a bottom is close. Is anyone else fed up with these calls? Pull tapes from CNBC everyday for the past year and every single day you will find dozens of “experts” saying that day is a great day to buy stocks. Every single day as the market crashed!
They also like to call bottoms in the housing market… All the way down they have been calling housing bottoms.
BOTTOM LINE: Ignore everything “opinion based” you hear on TV. Only use TV for news and facts about the economy.
March 5th, 2009 at 10:57 am
… welcome to the new economy, and the real world.
HOPE you love the CHANGE… Wonder when the rich americans… will move to a more favourable tax zone.
March 5th, 2009 at 11:02 am
People with offshored jobs have challenges with paying mortgages or much of anything else. Thanks W for encouraging that behavior and even telling us it was good for us.
What a P-O-S.
March 5th, 2009 at 11:04 am
@arcticpup: Where exactly are they going to go? Gimme a break with that nonsense. Here’s what I say to them: Don’t let the door hit you on the way out. Good luck somewhere else.
March 5th, 2009 at 11:13 am
Herein is the conundrum of the housing market…
No one wants to see everyone kicked out of their houses, yet no one with money to buy a house (and who is not insane) will pay these still inflated high prices for one in these economic conditions.
Therefore the either/or argument that either you support home prices or you the housing market never heals is complete B.S.
Foreclosures MUST play out… If any government help is to be injected, it should be to make sure that the foreclosed upon do not become homeless as a result of their predicament. I have no problem with trying to mediate so that someone with a foreclosed upon house is able to stay in a home for a given period by paying 31% of their income to the bank in RENT. Seems like a win/win/win for the now renter, the bank (who doesn’t need to dump assets into this market), and the taxpayer (who doesn’t pay a dime). The market will adjust down and eventually buyers step in… Keeping up this charade that housing is “worth” what it was purchased at a few years ago will only prolong this disaster.
Isn’t the solution to unaffordable houses basically letting housing get cheaper?
HCF
March 5th, 2009 at 11:27 am
Statistics can be misleading. That 1 in 8 number is deceiving. I can assure you if you looked at a heat map there would be big red spots around CA, Detroit, Vegas, and Florida . Those markets heavily distort the numbers. Bottomline, there are a handful of markets (granted highly populated markets), that are driving the numbers.
March 5th, 2009 at 11:29 am
DJI spending a lot of time around the 6660 level. where is Damian?
March 5th, 2009 at 11:33 am
This isn’t an American problem. It’s a California, Nevada, Arizona, and Florida problem.
March 5th, 2009 at 11:36 am
kmikev, Fredex:
Beat me to the post. Many markets and many homeowners are in distress, but would love to see these numbers adjusted for CA, NV, AZ., FL and MI.
March 5th, 2009 at 11:39 am
The United States is tanking… the Bush tax cuts… in which the philosophy is that the rich will stimulate the US economy didn’t work out to well… did it mannwich???
some 5 million underwater or in foreclosure… $7,500 homes in Detroit… and trillions of dollars in debt… and still no plan to fix the some odd $3 trillion worth crumbling instructure… the Big 3… are now the almost bankrupt Detroit 3… and GE is trading at around $6…. hmmm….
And China is saying it’s going to meet it’s 8% GDP target… hmmmm.. looking better everyday… even with a one-party system… can’t say that the United States two party system is any better… which pretty much is a one-party system accept for the so-called-vote every 4 years.
HNW individuals who prospered during the last eight years… might opted out of this mess by moving… onwards. Better ran countries, with non-nationalized banks… with oil resources, might look much safer in preserving wealth… this is the global economy… the printing press… and spending more money to consume… yeap… that’s so keeps the shell game going only until some says GOOSE….
March 5th, 2009 at 11:42 am
I agree, arcticpup. Not defending Bush or the rich at all. Catering to EVERY single whim of these so-called HNW individuals are the reason why we’re in this mess. That’s all I’m saying. Fuck ‘em.
March 5th, 2009 at 11:44 am
@fredex: You forgot Michigan, Ohio, Indiana, PA…….
March 5th, 2009 at 11:55 am
@HCF said: “No one wants to see everyone kicked out of their houses, yet no one with money to buy a house (and who is not insane) will pay these still inflated high prices for one in these economic conditions.”
Absolutely, bro. BTW, the foreclosure pain is coming to NJ, NY, CT in short order.
It’s going to cost me a lot of money to bail out these fools, isn’t it?
March 5th, 2009 at 12:03 pm
@leftback: When will we see the graffiti on subway cars return in NYC?
March 5th, 2009 at 12:05 pm
@ leftback: “It’s going to cost me a lot of money to bail out these fools, isn’t it?”
Sadly enough, yes… It’s sure easy for someone (Congress, Fed, Treasury, etc.) to spend money when it is not theirs to begin with!
Up here in the Boston area, you would expect that housing would be cheaper, given the economy and all, but it is still absurdly high… Many of my co-workers argue that “fundamentally” there is something better about MA than other states and areas. I think it’s bullshit… If job losses become more prevalent, then watch out.
I don’t know about other places, but here, the average family cannot afford the AVERAGE house. My wife and I make comfortably above the average income for the Boston area, yet we cannot buy the AVERAGE house without leveraging up to our eyeballs. I would say a normal house in a normal area (i.e. not gun-ridden, with a functional school district) runs maybe $300-350k. How much can the average family make here, maybe 60,70, 80k a year? So houses maybe should be around $240-250k to be affordable and/or fair value. That’s at least 20-30% drop from here. I’m pretty sure this back of the envelope calculation that can be repeated in most areas of the country…
HCF
March 5th, 2009 at 12:21 pm
I feel your pain HFC!
March 5th, 2009 at 12:36 pm
I read (was it here?) that 60% of mortgage work outs in 2007 were delinquent again within a year…
March 5th, 2009 at 12:47 pm
HCF @ 12:05
Obama, at least, is no doubt pleased. His shaft-the-renters program essentially forces renters to pay the cost (via taxes) of propping up housing prices.
Just politics, I guess.
March 5th, 2009 at 1:19 pm
@DL:
> His shaft-the-renters program essentially forces renters to pay the cost (via taxes) of propping up housing prices.
I know! Essentially the worst position to be in under current policies is a renter who can afford to buy! I chose not to buy because of the insanity and because the analysis and gut feel showed me that housing had to go down A LOT…. I worked hard to get to this point but apparently I am evil or something, because I am being put into the most disadvantageous position. I believe the government safety net has merely the purpose to keep ppl from being destitute under times of extreme social and economic stress. I have no problem with that. I DO have a problem with subsidizing anyone who lives a much nicer lifestyle than I do on our collective dime.
HCF
March 5th, 2009 at 1:47 pm
Same boat as you HCF, up here in Boston. I could easily buy right now, but I’m not an ostrich idiot and understand that we’ve got another 20-30% drop coming to the area. I rent for $3,000/month in a condo that my landlord has ‘offered’ to me for $650,000 in Boston. RIGHT. Hence, I’m getting hosed, with none of the write-offs of ownership, but refuse to pull the trigger until THIS market ‘capitulates’ and I feel that valuations become more reasonable. Trying to find something reasonable downtown is an absolutely fruitless endeavor. I figure I’ll be buying in late ’10 at this rate…
Not having the mortgage interest write-off is killing me. But I won’t buy an asset sure to devalue just to save a bit on taxes. *sigh*
March 5th, 2009 at 1:48 pm
HCF,
if they’re looking to create more Dependence, they’re doing a heckuva job..
43, 44, why even bother to change the #’s? O, that’s right~ it’s the Letter, that makes all the difference..
maybe, the sooner the Hamsters tire of being Guinea Pigs, we’ll find that what’s currently missing, is In-
March 5th, 2009 at 2:02 pm
Any reason why half of owned homes in the US have mortages? Sounds like a very high number.
March 5th, 2009 at 2:24 pm
And this is before the unemployment has really started to pick up seriously. We are going to need stimulus II and housing bailout II very soon, if we don’t want this country to implode and become south america. Unfortunately, the leader of GOP would rather see the country implode than Obama succeed and they have just enough senators to get their will.
March 5th, 2009 at 2:49 pm
HCF,
Of course they could offer you a cheaper price, but why wouldn’t they want you working an extra 15 years to pay it back to them?
That’s why we need to floor the housing market, the bank’s reserves* will cease to exist.
*Reserve –noun
7. Finance.
a. cash, or assets readily convertible into cash, held aside, as by a corporation, bank, state or national government, etc., to meet expected or unexpected demands.
b. uninvested cash held to comply with legal requirements.
Do they have any of A or B left? Bloomberg tells me no… At least not unless real estate prices rebound 90% next year ;)
March 5th, 2009 at 3:01 pm
Had to add the rest:
–noun
7. Finance.
a. cash, or assets readily convertible into cash, held aside, as by a corporation, bank, state or national government, etc., to meet expected or unexpected demands.
b. uninvested cash held to comply with legal requirements.
8. something kept or stored for use or need; stock: a reserve of food.
9. a resource not normally called upon but available if needed.
10. a tract of public land set apart for a special purpose: a forest reserve.
11. an act of reserving; reservation, exception, or qualification: I will do what you ask, but with one reserve.
12. Military.
a. a fraction of a military force held in readiness to sustain the attack or defense made by the rest of the force.
b. the part of a country’s fighting force not in active service.
c. reserves, the enrolled but not regular components of the U.S. Army.
13. formality and self-restraint in manner and relationship; avoidance of familiarity or intimacy with others: to conduct oneself with reserve.
14. reticence or silence.
Does the country have much of any left?
March 5th, 2009 at 5:07 pm
I was recently chatting with some of my co-workers. They are homeowners current in their mortgage payments and have no trouble paying them. They called their banks to try to get their mortgage rates reduced, but they were told since they were not “in hardship” they couldn’t get their loans modified. They would have to go the regular refinancing route and pay closing costs, origination fees, etc, etc. They complained that this wasn’t fair and contemplated missing a few payments so that they could get a modification due to “hardship”. Talk about unintended consequences.
March 5th, 2009 at 5:27 pm
>>tradeking13<<
Tell your friends that them there modifications are not something you would want to get into unless you have no other way out. They are a big scam whereby banks can reduce your monthly payments and increase the total profit they make on you. The banks need huge profits to survive and the noise you hear is the banks sucking dry the poor and vulnerable in their desperate attempts to survive. If they are current and have good amounts of equity they should simply refinance.
March 5th, 2009 at 5:31 pm
Anybody want to bet on what bank will be first with a publicity stunt like “LOAN MODIFICATIONS FOR ALL”, trapping the idiots into new more expensive (but lower monthly payment) structures that nobody can understand :-)
March 5th, 2009 at 6:52 pm
I just had this exact same conversation as this is my situation. Rates were at 4.5% quoted and I am not allowed to modify or refi because I am “underwater and but still able to make monthly payments” They told me I can drop cash on the principal to get to a point where I am back under the 15-20% cushion and qualify to get the lower rate, but why the F would i dump more cash into a depreciating albatross when I know that if the shit really does get to the absolute worst, I could still get foreclosed on and not have that cash to fall back on.
In reality, it doesn’t matter if you got 80% of your house paid off or 0% of it paid off (or 90% for that matter) if you don’t have the cash flow to cover the monthly payment, they still take it! Hopefully I will ride it out or reach a point in which I have enough cash on hand to buy a comparable foreclosed special outright and tell the bank “good luck finding somebody else to pay for that loan you wouldn’t let me refi” I can stick around for 7 years in one spot and wait for my credit and the market to recover!
March 5th, 2009 at 8:25 pm
To make any sense out of these gross numbers, you have to know a few basic things. Like what percentage of the 12% are people who own more than one property for starters. It could be that we just gave in to the “find it, fix it, flip it” mania of the past several years. On top of that, we’d have to know what percent of the 12% represents people who knowingly didn’t have the income to support the mortgage they were given. Add to that the percentage that would be okay with only one mortgage on their residence but are trying to support two mortgages and can’t support the second one. Each of these scenarios represents something that is relatively new to the American home ownership landscape. It’s easy for people who aren’t yet 45 years old to not remember that the way it “used to be” was a borrower was required to put up 20% down to buy a house. That’s what we were required to do when my wife and I bought (at a 12% interest rate!) in the 1980s.
Barry, do you have any idea what percentage of these people actually put 20% down on their home and own only one property? Or do you even care?
March 6th, 2009 at 12:18 pm
DiggidyDan;
What you and everybody else have the option to do is to stop paying on the mortgage, fight the forclosure and start saving up some money. Then when they finally kick you out, rent for a few years (continuing to save). Then buy a house sometime in 2012-13 when we have hit the final low in real estate prices. My guess is that a fair number of those 12% are people who could pay, but have realized that if the banks only look out for themselves, then it is stupid for the borrowers to not just to do the same. This cold raw capitalism thing can work both ways.