It’s Not Even a Bubble: Foreclosures on the Rise

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Editor’s Comment: Realtors and Banks want you to think that you need to buy now before the  market takes off and prices spiral upward. I say don’t believe a word of it.

If you are buying to live in a house, you should know that the actual and shadow inventory of foreclosures will keep intense downward pressure on housing prices for many years to come. Some estimates, including mine, are that the housing market might take more than 10 years to recover and that it could be as much as 20 years. This is why so many people are renting rather than buying. Rental values are going up because there is actual demand for renting.

If you are buying for investment, see the above paragraph. You might have a viable investment if you are willing to stay in for the long pull and you are willing to take on the duties and obligations of a landlord.

If you are selling and you are waiting for the market to bottom out, or maybe you see a spike and you think you’ll wait just a little bit longer to get a higher price, forget it. Sellers, as realtors will even tell you, are mostly unrealistic about the sales price of their property. This is because they bought or once saw the price of their property at twice the price as the offers now. The reason is simple — prices went up but values stayed the same or even declined. The difference between prices and values has never been as big a deal as it is now.

Prices can be forced up by actual demand but never as much as we saw from the late 90’s to the peak at 2006. The prices went up because the payments went down or appeared to go down.

Free money was everywhere and nobody was reading the fine print or even questioning why Banks would offer such deals as teaser rates and other nonsensical things to entice people into signing up for mortgages, whose payment would eventually rise above their household income or where the payment was the equivalent of doubling the interest rate because they were going to be sitting with a home that declined to its real value.

The truth is that even if a recovery eventually occurs, it will be 20+ years before we see those prices again. And that will only result from inflation which eventually will pick up steam.

And by all means remember what I have been writing about these last few weeks. The title they are offering you, with a deed signed by a bank, or even a satisfaction of mortgage signed by a bank may not be worth the paper it is written on and the title policy normally excludes that sort of risk from what they  are covering in title insurance. So if you don’t pose the hard questions and negotiate a real title policy that covers all the known risks, you could be the angry owner of a white elephant that cannot be sold later nor refinanced.

From CNBC:

Home prices rose, just barely, in the second quarter of this year annually for the first time since 2007, according to online real estate firm Zillow. That prompted the popular site to call a “bottom” to home prices nationally. The increase was a mere 0.2 percent, but in today’s touch and go housing recovery, that was enough.

Nearly one third of the 167 markets Zillow tracks in this survey saw annual price gains from a year ago.

“After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values,” said Zillow Chief Economist Dr. Stan Humphries. “The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own.”

Zillow’s report, which compares prices of homes sold in the same neighborhood, also showed a stronger 2.1 percent gain quarter to quarter, which is the biggest uptick since 2005. The biggest price gains, however, are in the markets that saw the biggest price drops during the latest housing crash. Phoenix, for example, saw a 12 percent annual price gain on the Zillow index.

That has other analysts claiming that the overall surge in national prices is due to price bubbles in certain markets.

“Strong demand, particularly in areas of California, Arizona and Nevada, are pushing up home prices very quickly in the short-term. And because many of the home purchases in these areas are cash transactions, there appears to be less braking of prices by our current appraisal system than seen in other parts of the country,” noted Thomas Popik, research director for Campbell Surveys and chief analyst for HousingPulse. “The trend raises the distinct possibility of housing price bubbles emerging in some of these hot housing markets.”

The supply of foreclosed properties for sale has been dropping steadily, as lenders try to modify more loans or actively pursue foreclosure alternatives, like short sales (where the home is sold for less than the value of the mortgage). Investors, eager to take advantage of the hot rental market, are having to spread out to more markets in order to find the best deals.

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“We were heavily into Phoenix early in the cycle. Those markets are heating up,” said James Breitenstein, CEO of investment firm Landsmith in an interview on CNBC Monday. “We see a shift more to the east, states like North Carolina, Michigan, Florida.”

While home prices on the Zillow index are improving most in formerly distressed markets, like Miami, Orlando and much of California, they are still dropping in other non-distressed markets, like St. Louis (down 4 percent annually) Chicago (down 5.8 percent annually) and Philadelphia (down 3.5 percent annually).

“Those people looking at current results and calling a bottom are being dangerously short-sighted,” said Michael Feder, CEO of Radar Logic, a real estate data and analytics company. “Not only are the immediate signs inconclusive, but the broad dynamics are still quite scary. We think housing is still a short.”

Radar Logic sees price increases as well, but blames that on mild winter weather that temporarily boosted demand. This means there will be payback, or weakness in prices during the latter half of this year. And even without the weather hypothesis, they see further trouble ahead:

“On the supply side, higher prices will entice financial institutions to sell more of their inventories of foreclosed homes and allow households that were previously unable to sell due to negative equity to put their homes on the market. As a result, the supply of homes for sale will increase, placing downward pressure on prices. On the demand side, rising prices could reduce investment buying,” according to the Radar Logic report.

Investors are driving much of the housing market today, anywhere from one third to one quarter of home sales. That makes these supposedly national price gains more precarious than ever, because they are based on a finite supply of distressed homes and that supply is dependent on the nation’s big banks. First time home buyers, who should be 40 percent of the market, are barely making up one third, and millions of potential move-up buyers are trapped in their homes due to negative and near negative equity.

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27 Responses

  1. Do you remember when I rang the alarm on the bankers resignations a few months ago? Someone has been compiling a list of bankers’ arrests. Of course, all those were on the news but since we’re not talking about Dimon, Stumpf, Moynihan and cohort, I didn’t pay much attention.

    Well, the list can be found here. Quite a number of mortgage-fraud players have been arrested in the past 2 months and are serving time.
    Who knows, one of these days I may even find my lender-turned-title-insurer make the list. Can’t hurt to be able to tell a judge that some of your players are cooking as we speak, right?

    http://americankabuki.blogspot.com/

    Don’t shoot me over the site. i know, I know. It is one of those fringe ones. Still, those are the only ones that mention the real story…

  2. Just say Im barred form this site – for a good reason

    So NOMODS=Solimon—? Curious what is good reason for being barred from the site? But being there under another name? Who is doing barring? This is some sort of site politics—–i dont understand a lot of the comercial undertow going on—but boy did traffic pick up when author stated hes being covered by press!!!!

    But didnt sound like friendly press——FOX???? A hatchet job coming? Are they gonna say everybody associated is unscrupulous taking advantage of impoversihed homeowners?

    Or just Stalinist types as was stated in WSJ today about anybody who thinks TBTFs are not beneficial——Sandy Weill a Stalinist—I hope he decides to put some effort behind his words——

  3. What is a “james Holmes” —-is he in some way relevant to financial issues??? Other than dropping out of school and realizng he had 90 days to start paying off a humongous student loan debt and with no jobs available? why are his parents testifying in congress –or did i misunderstand?

    is it gun control ?

  4. ” And because many of the home purchases in these areas are cash transactions, there appears to be less braking of prices by our current appraisal system than seen in other parts of the country,” noted Thomas Popik, research director …..”
    “less braking of prices by our current appraisal system”? Read:
    appraisal will not come in low because transaction is for cash. What an interesting way to phrase ignoring prudent appraisal mandates.

    @nomods: clearly you’re not banned from this site. But might you be doing us readers, as well, a disservice by throwing out very nearly raw allegations that Mr. G is full of it? What exactly is the point of throwing out your version of “facts” with no meaningful explanation for those of us who dont have a clue of what you say? Well, a clue, but still, a whole lot of torturous work which might be avoided by clear explanation, and as relevant here, in one-syllable words. You may be right. Je ne sais pas; we don’t know, prob safe to say. You appear to have injected some language from a complaint, which only teases the uninformed mind, yet you make no real effort at discernible explanation. Since you direct us “Go read ASC 320 – it will tell you all you need to know”, it appears that’s the extent of your contribution.

    I’m (almost) always willing to be wrong. Maybe you are able to and want to offer explanation. Where is your website, that we might shuffle on over, wherein you day in and day out toil to educate and inform? Or might you direct me to your contributions to this site or others over these years?

    Soliman is a hoot. But even his info is for sale (okay, that’s his deal), though he formerly deigned to likewise offer snippets, be they often unintelligible at least to many of us (je suis desolete, ms, may tu sais.) A lot of Mr. G’s ‘stuff’ is for sale, also. Okay again. But he has provided – and tolerated, obviously.

    I guess I am taking offense on his behalf at your attack. There’s more than one way to say someone’s fat, and you have chosen a most
    ungracious one.

  5. @NOMODS

    “In a subrogation claim your entitled to exoneration and salvage”

    I think that it would be helpful if you were to educate us on some of these technical terms by elaborating somewhat. Maybe some examples–I assume you are speaking to somebody that apparently understands what you are stating—but i am simply too ignorant to understand your point and do not want it to fly by me—pls simply a bit–or add an example and help me out here—-im old and apparently not familiar with the specialization area that you are addressing—what is your background if you dont mind my asking?

  6. Getting back to the thrust of the Article: the “housing bubble” that imploded reminds me of what happened in Japan. At the height, the land patch sitting underneath the Imperial Palace in Tokyo had a price greater than the total prices of all the land mass in all of Canada. After that folly collapsed, Japan entered the “Lost Decade,” where zero (or negative) interest still left a realty market that was stagnant for 10 years. Price deflation was the order of the day.

    In the USA, the picture will be worse. At least the Japanese did not have bankster land-title fraud to contend with. You may expect real price deflation for well over ten years.

  7. YOUR SECURITY INSTRUMENT combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a ** uniform security instrument ** covering real property.

    IT’S LIKE A FREEHOLD ESTATE USED IN EUROPE – SO THEY WOULD BUY OUR SECURITIES DAMN IT !. YOU LOST YOUR HOME AT SIGNING AND SETTLEMENT!

    M.SOLIMAN

  8. Just say Im barred form this site – for a good reason ….

    1. If the beneficiary or successors voluntarily relinquished possession of it, his lien is lost.

    2.Allegations are for variety of deceptive practices and material non-disclosed counter party transactions that compromised fee simple rights for title held to his estate.

    3.Defendants are a mortgage lending consortium that have progressed in 10 years into a new international investment standard that portrays a states civil code governing bond for deed as a concealed Deed for Bond investment strategy.

    4.Plaintiff alleges that he received a fractional commerical loan on or about June of 2006 whereupon he is asked to sign a “uniform” nationally used unconventional mortgage or deed of trust. The deed of trust is executed by Plaintiff with understanding for a commerical debtor offering a borrower conventional Security Instrument that secures to Lender under a national unifrom security instrument “the blanket mortgage” . . .to ensure repayment of the commerical loan and the performance of the “other” member banks borrowers covenants and agreements under the said false Security Instrument and the REIT obligation as the Note.

    5.Plaintiff’s arguments for declaratory judgment and all other injunctive relief prevail from preponderance of evidence whereby if the beneficiary or successors voluntarily relinquished possession of it, his lien is lost.

    registerclaims@live.com

    not an attorney and not practicing law – for info only.

  9. In a subrogation claim your entitled to exoneration and salvage. TARP defeats the surety claim and that is why MersCorp is there for. Join MersCorp to free your equity from a defaulted commercial loan.

    MSoliman
    registerclaims@live.com

  10. @Nomods,

    Where is Soliman? Did someone pull a James Holmes on him?

  11. MERS CORP is the only thing left connecting you to the mortgage . Stop attacking Mers – Joinder people. Joinder…. Its the biggest con out there -attorneys attacking Mers Corp

    registerclaims@live.com

    You = MersCorp

  12. registerclaims@live.com for proof

  13. MSoliman – The mortgage was divested into securites. its the same as if the home were sold. Now the home is being purchased back at a trustee sale using your equity.
    The Bar knows this people ….the Bar knows this and is told to stay out of these matters. Careful .

  14. MSoliman – The mortgage was divested into securites. its the same as if the home were sold. Now the home is being purchased back at a trustee sale using your equity.

    Garfield is a crack pot and clueless – got it. See ASC 320 and fight the fight against Garfield not the lender .

  15. Coursen – see enraged’s link – discusses when it’s appropriate to pierce the corporate veil – think MERS!

  16. In coursen, robo-s Goebel was involved. She signed as “VP of WAMU”.
    The court put a name on this: violations of FLA 817.54 and 831.06. I have seen versions of these statutes in other states’ laws. And I bet we could find this act to be violative of other statutes, as well. Never seen anyone fight as hard as Coursen. Kudos.

  17. Courson vs JPMorgan will settle out of court. Cases like this have all settled out of court or never went to court if you have insight and a good attorney. This one will be no different. Any Guesses why my friend of 8yrs is now a Federal Prosecutor? Keep a Close eye on this case ……

  18. According to an art I read about MO’s treatmwent of the settlement fund- someone linked here – attorney Floyd Finch of Finch and Campbell is helping homeowners navigate that “Independent Foreclosure Review”. He is with Finch and Campbell in Kansas City.

  19. JG,

    My pleasure. And notice: the Rico count hasn’t been squashed! This is huge. It means that anyone can, from now on, allege Rico and it will survive a motion to dismiss. Of course, whether it survives trial is another story but… one step at a time.

  20. @ Shelley: at 32 nd minute of your video below author reveals a judge stole a house with staged foreclosure…. Wonder why foreclosures are staged at courthouses? A: so court-insiders can have first & best bites….

  21. THANK YOU for the update on Coursen, enraged. I’ve lost my ability to stay up on all these cases and that one is certainly on my list. If anyone is interested, I’ve got I think 4 of the pleadings at scribd.

  22. Shelley-
    I have had a jury trial set up for 2 years and last week BOA talked to Judge and now it is changed to a bench trial. Certain conditions were set up to be completed by 6/30/12 and BOA did not do their part and Judge extended time for them. The Judge extended trial date by 5 months so BOA could get ready. They have had 4 years to get ready. Do you thinK I need another judge. Thanks for opinion.

  23. I hope this creates a legal battle that brings out the proof of fraud and criminal acts by the banksters. I hope some good comes out of this.
    http://stopforeclosurefraud.com/2012/07/27/chicago-considers-eminent-domain-to-seize-underwater-mortgages/

  24. Housing Prices: A FUTURE VIEW
    The price of homes is not an independent variable based on market forces. The price of a home is inversely related to the long term fixed interest rate. The ordinary non-cash prospective buyer of a big ticket capital item: a home, a car, etc. knows her decision is very much affected by the payment amount.
    The Federal Reserve effort to save the housing market by pushing long term fixed rates down is cynical policy at best. Typically a couple walks into a realtor’s office and the first question asked is: How much are you planning on spending? Frequently the novice homebuyer will respond: I can only afford to pay say $520/month, after I make auto payments, child care, health insurance, etc. What price range does that allow me to look at? The realtor will quickly respond: in today’s market you must put 10% down, and the interest rate at XYZ bank this week is 4.4% on a 30 year loan. He will whip out his handy calculator; punch in the numbers, and reply you can buy a house that has a price [not value] of $110,000 if your credit is good, by financing $100,000. Google “loan amortization schedules” CF http://www.loanamortizationschedule.org/
    Obviously, the interest rate has a huge impact on the amount of the monthly payment. The availability of extraordinarily low long term rates allows the prices of homes to be over-stated. The buyer today can acquire that $110,000 house and pay $500/mo. However, the average buyer is not likely to see large increases in pay anytime soon. So our hypothetical buyer obtained a deal she can live with, but what happens if she or her spouse lose their job and need to relocate sooner than 30 years?
    Their $500 monthly payment was dictated by the wages they receive and the cost of living. Global labor markets are likely to exert continuous downward pressure for decades to come in our new Globalism reality. The deficit spending to support a never-ending global war, and increasing social security and health-care costs driven by demographic changes is likely to cause serious inflation as the Federal Reserve prints dollars to cover the mounting deficits.
    The pool of potential buyers shrinks as the prices of the house rises. The wages needed to support that higher priced house must go up. Taxes on wages, already at near 50% on middle class families, are likely to go up as the Euro-style austerity sneaks into the US economy. The frequently posited VAT tax –a Federal sales tax at 15-20% becomes more likely. The future for young people today is almost as bad as for the baby boomers that have lost pensions and also face escalating taxes, and cost of living.
    So our happy couple with the $500 payment on the $110,000 home will likely have to sell into the face of more normal rates—or worse. Let’s assume a 7% interest rate environment. Now the new buyer must pay $665/mo. just to give our couple their money back. The payment must increase by 30% to cover the increase in Federal Reserve dictated long term rates. So let’s say that the shrinking wage base simply does not allow a new buyer to carry a 30% increase in monthly payments. In order for the new buyer at the couple’s employer call center, or other service economy enterprise, to be able to afford the house two years hence, the price of the house must decline to $82,500 with a $75,000 mortgage. Our happy couple must withdraw from their IRAs about $23,000 to pay off the below water loan and the realtor fee.
    The benefits of the low interest rates supported by the Federal Reserve do not run to home-buyers. More likely the benefit runs to the flipper that bought the house for $85,000 cash and resold to our happy couple for $110,000—by pumping the value using the ultra-low interest rates. The low rates are great for people refinancing homes—but spell doom for a new buyer. Let the buyer beware.

  25. It keeps moving. Note that MSM is now investigating. It might start small and local but it is spreading. Don’t look at how much still needs to be done. Focus on the progress made so far nationwide. This is the only way to keep some sanity.

    http://www.kctv5.com/story/19088625/kctv5-investigates-missouris-foreclosure-settlement-money

    Missouri received a lump sum of nearly $40 million from the settlement and most assumed Missouri Attorney General Chris Koster would direct the money to programs aimed at easing the effects of the foreclosure crisis. That did not happen.

    While Koster would not agree to an interview with KCTV5, in an email his spokesperson stated that “because of revenue shortfalls in the state, we made the decision to treat the mortgage settlement funds the same way other settlement funds are treated. In the majority of cases, Attorney General Koster has given settlement funds to General Revenue for the legislature to appropriate.”

    Once the money landed in the hands of lawmakers in Jefferson City, Gov. Jay Nixon pledged the almost $40 million to state colleges and universities and the legislature agreed. The idea was to offset $106 million in cuts to higher education, but that decision was not without controversy.

    Former state senator Joan Bray, a Democrat from the St. Louis area, objected to the move.

    “Don’t get me wrong, I am a big supporter of higher education,” she said. “But when money comes in for a purpose, and such a basic purpose as housing, it should be used that way.”

    Bray is now chairwoman of the Consumers Council of Missouri, a nonprofit organization advocating for the interests of individual consumers, especially in the areas of personal finance.

    “Housing and people’s homes are sort of the bedrock of our communities,” Bray said. “And the fact that money didn’t go to help more families in trouble with their homes was a real miscalculation in the right way to go about things.”

    Finch agrees.

    “It’s frustrating to see that money taken away from people who have actually been harmed by what the whole attorney generals’ lawsuit was about,” he said.

    Bray believes Missouri should have used the roughly $40 million to set up a foreclosure mediation program, similar to the ones already helping people in states like Illinois and New Jersey.

    “Missouri is a non-judicial foreclosure state, meaning a bank can proceed with foreclosure without going to court,” Bray said. “But in a mediation process you would try to get everybody in the room, calm down and then listen to each other, deal with the facts and see if you can keep people in their homes paying their mortgages.”

  26. From Nye: Coursen v. JPMorgan Chase et al

    Motion to Dismiss DENIED.

    MANUFACTURED DEFAULT and RICO are now on the table!!!
    The ORDER contains the new foreclosure defense mantra:
    “Plaintiff’s civil RICO claim is not time-barred inasmuch as Plaintiff asserts that she was prevented from discovering that she was the victim of fraud by Defendants’ concealment of the alleged fraud.”

    http://www.msfraud.org/law/lounge/coursen-v-jpm_mtd-denied_rico-stays_7-12.pdf

  27. A MUST WATCH VIDEO! http://www.youtube.com/watch?v=FLkpbMgN3Bc Includes support of my statement there is a lack of knowledge or ability to look at a fraud doc ONE OF THE BIGGIES IN THIS VIDEO IS THE UNITED NATIONS IS BANNING INDIVIDUALS FROM OWNING GUNS AND BARRACK OBAMA IS GOING TO SIGN THIS LAW. We are being set up for Marshal Law !

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