Friday, December 3, 2010
Double Dip In Housing Largely Caused By Failure to Prosecute Mortgage Fraud
There's a double-dip in housing prices (and see this and this).
As CNN points outs:
Much of the massive shadow inventory of homes is due to the fraud involved with mortgage documents.U.S. home prices fell 2% in the third quarter after having gained steadily since early 2009.The S&P Case-Shiller Home Price Index has recorded gains in four of the previous five quarters, including a 4.7% jump between April and June 2010. That leaves national home prices down 1.5% year over year and off 2% compared to the second quarter, according to the Index, which was released Tuesday.
***The inventory of homes is high with nearly 3.9 million on the market in October, according to the National Association of Realtors. That means it would take 10.5 months to sell through all of the current inventory. In a normal market, there is usually a six-month supply.Plus, there's a massive shadow inventory of homes waiting in the wings. These are homes that are deeply in the foreclosure process or even repossessed by banks but not yet put back on the market.
CNN notes in a second article:
Reuters reports:Big banks are having trouble restarting the foreclosure process after this fall's "robo-signing" scandal, and the once booming market for foreclosed homes has been hit hard as a result.According to ForeclosureRadar, the number of properties coming to auction in hard-hit western states -- Arizona, California and Nevada -- has dropped more than 30%.
***Investors had been doing brisk business, buying distressed properties on the cheap, sprucing them up and flipping them. But now they are being far more cautious."Their concern is that homeowners will be more aggressive in fighting foreclosures even after the auction sale," said Sean O'Toole, CEO of ForeclosureRadar.For vulture investors, speed is essential -- they do not want to tie up investments for months while attorneys argue.They are also worried about being able to unload the property.
***Pressure on the market for distressed properties could last if delinquent borrowers are less likely to give up on their homes, according to Duane LeGate, CEO of Georgia-based House Buyer Network.***
LeGate says his business dropped more than 30% the week after news of the robo-signing scandal broke, and has stayed down since. His theory: homeowners think the bank will have a tough time kicking them out in this environment, and that they can live for free for a while. He says he's got two friends who intend to do just that.
And Zack's Investment Research writes:Shadow inventory is seen as one of the chief threats to the fragile housing market that is showing new signs of weakening.
***
Adding to the problems are errors in processing tens of thousands of foreclosure cases at Bank of America Corp, the largest U.S. mortgage servicer, and other financial institutions.
The massive failure to provide proper documentation in court has resulted in delays to an already lengthy processes of repossessing homes, leading to a backlog in paperwork and repossessions as the companies fix their procedures. The banks are also facing a nationwide probe by state attorneys general.
***What's more, buyers of distressed properties have become gun shy due to the foreclosure processing problems, according to a Campbell/Inside Mortgage Finance survey of real estate agents.
The poll found 14 percent of owner-occupant homebuyers and 6 percent of investors refused to view foreclosed properties in October.
Foreclosures have slowed recently, but that is only because of the fraudclosure scandal, where the banks have proved to be exceptionally incompetent in handling the paperwork related to securitized mortgages. Basically, they can’t really prove that they hold the mortgage, and thus don’t have the right to foreclose.For those who doubt that fraud is rampant in the mortgage paperwork mess, see this, this, this, this, this and this .
It remains to be seen just how big a problem that will prove to be. It could just be a technical glitch that will gum up the works for a few months, or it could be a HUGE problem that once again undermines the solvency of the entire banking system.
***
What is clear is that what [Bank of America, Wells Fargo and other big banks] were doing was illegal and at least technically constituted fraud and misrepresentation to the courts.
There should be more than a handful of bankers who end up with long terms in prison as a result. Just because there should, however, does not mean that there will be. White-collar crime is simply not taken seriously in this country relative to blue collar or street crime, even though the amount stolen with a pen far exceeds the amount stolen with a gun.
There are obviously other factors responsible for the softening housing market, such as the end of government stimulus programs regarding housing, and poor employment conditions. But as I've pointed out early and often, these problems are all interrelated. See Another Nobel Economist Says We Have to Prosecute Fraud Or Else the Economy Won't Recover.
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ReplyDeleteThe read here on the housing market is massively naive.
ReplyDeleteIt's the sort of naivete that got a lot dumb-ass bankers thinking -this housing thing is an easy buck.
Baloney.
The use of the expression "double-dip" is a bit lax in our current situation.
We have suffered unprecedented housing distress -due initially to demographics.
First -the idiot-initiative was made to get everyone into a house who could put steam on a mirror held under their nose. Ability-to-pay meant absolutely nothing.
And now, the emphasis is upon keeping the collapsing market from actually registering on the balance sheets of financial institutions who are paper-heavy in real estate.
To say there is 10.5 months of inventory is an absurd bit of falling-for the intentional logical malfeasance of those high-paid-liars who count up the numbers.
That 10.5 number represents the unit consumption in a booming economy that hasn't already run through most of its potential buyers for the next ten or twenty years.
Speculators -and it is foolish-speculators of one sort or another who are still buying housing- are beginning to realize they have been suckered by all the intentional malfeasance -into buying a pig-in-a-poke.
There are no RETAIL BUYERS in the housing market any more. None. There are none, whatsoever.
Here is just one reason WHY.
Housing costs, -the costs of home ownership- are skyrocketing even as home prices continue to decline faster than the Twin Towers fell when they were demolitioned.
The rising cost of home ownership is a major component to the myriad reasons for the decline in housing values.
When it costs 10x as much to heat your home as it cost ten years ago, HOW MUCH IS YOUR HOME WORTH NOW?
When it costs 10x as much to pay the property taxes on your home as it did ten years ago, HOW MUCH IS YOUR HOME WORTH NOW?
When it costs 10x as much to do maintenance and repairs on your home as it did ten years ago, HOW MUCH IS YOUR HOME WORTH NOW?
Everyone is quite used to hearing about the real value of the dollar today versus some time in the past.
But the dollar isn't the only thing to depreciate like that.
Housing because it is getting more expensive to own on many fronts, is depreciating exactly as the dollar is depreciating.
A home cannot hold its value in-real-terms when it costs more to heat, to pay the taxes, to do the maintenance and repairs, AND, when it costs more to have the trash picked up, the water come through the pipes and the sewer to flush.
But that's just the beginning.
It is also massively more expensive to commute any distance. There are far fewer high-paying jobs. Even the PROPORTIONALLY HIGHER costs of things like food, education, medical care and not to mention all the frivolous items we are encouraged to buy now, like 33% interest on that stupid credit card your wife used to take with her when she went shopping at the mall...
This collapse is a collapse not just because of economics or a double-dip- LOL -that double-dip.
The collapse is due to the fact that everything about the scientific approach to modern living that has been sold everyone -is far-far beyond our collective means.
That's what the deficit means.
That's what the trade imbalance means.
That's what all those homeless people in the street mean too.
I am not very surprised by slow recovery or double dip. In fact I have written for quite a few times on this, like this and this.
ReplyDeleteI appreciate the post as well as all the comments...certainly feels like I learned a thing or two. I won't readdress the things already covered, but I'd like to ask where you guys your thoughts on the following...
ReplyDeleteRecent FL News Headline posted on my site...
Florida residents want banks to maintain homes
Article: Encourage FL Legislature to change the laws to require those institutions holding the mortgages to cleanup the mess
uLive4: Idea: Banks either cleanup the mess or forfeit the property to local municipalities/communities - http://ulive4.com/news
What do you think?