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Monday, August 07, 2006

Area Foreclosures On The Rise

Even though our area doesn't have as high of a foreclosure rate as you might expect, the toxic loans and suicide financing are still having somewhat of an effect...

In Seattle's hot real estate market a growing number of people are losing their homes in foreclosure.

For most people losing their homes, there are several investors waiting to snap them up.

In Washington state the foreclosure rate is up nearly 30 percent over last year, and more than 1,000 homeowners have been going through foreclosure this past year.
...
Why are more people losing their homes?

Experts say interest only and adjustable rate loans are enticing buyers into trouble.

"So they can get into their dream house when maybe they should have waited a few years when their income went up and not taken these risks," said lender representative Karen Gibbon.
In other news, experts say that when an egg is dropped on the sidewalk, it is likely that it will break. Who can blame those overeager buyers though? I mean, they're just trying to live out The American Dream™, right?

(Linda Brill, KING 5 News, 08.04.2006)
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20 comments:

seattlle price drop said...

The "American Home-ownership Act of 2006" (HR 2151) just passed the House of Representatives recently.

It allows for considerable loosening of FHA loans. Ups the maximum "dollar" amounts available ( a concession to rising house prices), allows for interest -only loans, etc. etc.

All this at a time when it is CLEAR to every legislator that the price of homes is coming down.

Anyone catch Bernanke's question and answer period in WA. DC a couple weeks back- many of the questions by our politicians addressed their concerns about a softening housing market.

Yet only 7 legislators voted against loosening the already out of control lending standards.

Your Representatives at work for you! Bring on the pain of foreclosure and KEEP IT COMING!

That's the message to their fellow Americans.

HR 2151 goes to the Senate next, where it is expected to, at least, not pass by such a wide margin.

Anonymous said...

This was actually a refreshing news piece to see in on King5. Something tells me King5's at a little more liberty to talk truth about the darkside of local housing, or as I like to call it the 900lb Gorilla in the 500 sq.ft. No-Doc'd/Neg-am'd condo...

I've written the patron saint of the Seattle Housing Bubble, Elizabeth Rhodes, numerous times begging her to round her reporting with a little discussion of toxic loans, as a PSA sort of thing... of course, nothing. Since the papers have to hump for those 20 odd pages of Windermere/Re-max ads a few pages into their Real Estate section, it makes twisted sense that the reporting there is nothing more than loss-leader ads for huge advertising payouts...

matt said...

sorry, anon 05:46 was me...

Anonymous said...

I have been watching the pre foreclosures in my area (98391) go up about 40% in the last year.

The numbers are a low froth at this point but will be ballooning over the next two years.

I must laugh at the pipeline line.
You just know that they are replacing rate hikes with gas hikes. This still wont hold up the dollar or prevent the housing bubble from collapsing.

I used to be disgusted; now I’m just amused.

-Crashcadia

plymster said...

Nice heads up on HR 5121, Seattle Price Drop. (It's HR 5121, not HR 2151.)

Here's a link to the bill's menu, and another to the summary. Guess who the sponser is? Well known criminal/congressman, Bob Ney. (Do you get a "slashie" award for that?)

The final line of the summary explains why it's getting so little pushback: "Authorizes the Secretary to enter into agreements to insure temporarily certain mortgages for a single family residence located within a presidentially declared major disaster area." - AKA - help Katrina victims.

Unfortunately, they also squeezed in some bits that allow for the loosening of FHA mortgage insurance standards, and lets the FHA cover HELOCS to elderly speculators trying to buy multi-unit investment properties (provided they live in one of the units).

S.3535 is the relavent Senate bill, if you'd care to write to your Senators about this one.

Anonymous said...

Being that I just want to purchase a home. Im looking at Real Esate in eastern washington, around moses lake area.
Someplace with no real appreciation where you can buy a home for 60-80,000.
Why because if it gets really bad in the next few years I will have a refuge all paid for free and clear.

Of course, being a Hoarder of Gold as well. Fits my bill, Im thinking about filling the place with Commodaties. Because maybe going forward that is about the best security "home paid free and clear with enough commodities to weather a economic downturn for a few years.

Funny how I can turn from being so optimistic on the future to being so Bearish. Im not planning on building a neclear shelter by any means.

Then again if someone asks if Im a homeowner "I can say sure.. Im a homeowner. Paid for Free and Clear.. living in a rental in Bellevue and Owner someplace else.

synthetik said...

Non-Sequitur from my old reator in Tampa, Florida. This is standard boilerplate for reators that are in down markets. My realtor in San Diego has been shoveling the same poopie for the last almost 3 years now.

"It's a buyers Market"

Anyway, here is the e-mail spam I just got:

**insert pic of his new baby** (whatever it takes to 'sell this house today')

"So, XXXXX, when do you think the bubble will burst?" I am getting a lot of questions from clients about my take on the real estate market. People want to know how to act smartly as the market cools off.

Driving around Tampa Bay makes the RE news self-explanatory. It's a BUYERS market! According to the MLS, June and July res. sales are down by 40% for Hillsborough and Pinellas in comparison to June/July last year. That's 27,300 residences for sale, which has quadrupled since this time last year.

Many of my realtor friends have told me that they are carrying more listings than ever, dropping the prices, and still homes are not selling! (imagine that)

In this buyers market, sellers need MY HELP even more, because I help sellers GET THE MOST for their home (translation: I help facilitate a quick sale so I can get my commission).

Call me if you are thinking of selling..."

blah blah blah blah.

This doesn't surprise anyone I'm sure. What choice does the realtor have? I suppose he is at least directing his marketing efforts at sellers. For sure the smart move in Tampa is a quick sale before the financial hurricane hits.

My realtor in San diego has been telling me it's a buyers market for 3 years now.

Sorry pal, it's only a buyers market when their are few to no buyers OR sellers. And all those other indicators that I will repeat if anyone so desires.

synthetik said...

Having been a homeowner since 21 and until the last 3 years, I have desperately wanted to get back into a house. I still think res. RE can be a terrific investment as a personal residence or rental property.

Just not right now obviously.

I started following the housing bubble in late 2003 during all the equity locust chatter in San Diego about Vegas and Phoenix.

I have trained myself to look for other alternatives when everyone else is doing something en mass. Herd mentality, etc.

My initial thoughts over the past 2 years were that the housing market would crash and bubble markets would roll back 20-40%+ of their equity - and somehow, magically, the financial markets would be unhurt.

I've changed my mind based on discussions with friends, postings on various blogs, and the tremendous amount of negative MSM reports about the oil, inflation, war, etc.

It's essentially all pointing to a recession from what I can tell. If you disagree, please tell me what you think will save us from that?

I just moved 70% of my stock portfolio into 5.15% savings account, joining the rest of my liquid capital to ride out the financial storm/recession we are headed for. I figure when it comes time to put $44K tax free into the SEP this year there will be some buying opportunities in the market. It's 5.15% until then!

Cash is going to be king in late 2006-2007.

jcricket said...

This is an interesting caveat/comment on foreclosure statistics.

I just moved 70% of my stock portfolio into 5.15% savings account...It's 5.15% until then! Or until the Fed lowers rates and your 5.15% goes back to 1% :-)

What you're doing is called timing the market, and very few people do it successfully. A recession, even a sustained one, isn't usually a good time to pull all your money out of the market. A properly diversified portofolio, combined with automatic investing, will let you "ride it out" and the power of dollar-cost-averaging will leave you better off in the end.

Sure, you could be an investing genius or lucky, and get out right at the top, and in right at the bottom. More than likely (I'd say 90% chance), you'll end up worse off than someone who just keeps investing and rides out the coming recession while staying invested.

seattle price drop said...

Plymster, those are some awesome links you provided us with. Thankyou!

And thanks for the correction on the # : 5121.

I was wondering who the 7 upright lawmakers who voted against it could possibly be.

Unfortunately, I recognized only one name, Ron Paul from TX.

The sponsor/Bob Ney link was great, if only for the sleaze factor. And on a lighter note, Bob Ney also brought to Americans that powerful idea of renaming French Fries/Toast to Freedom Fries/Toast.

Yes, this is a politician we need to guide us down the rough road ahead.

synthetik said...

>What you're doing is called timing the market, and very few people do it successfully

Aye! Sherlock!

I feel confident that it's the right move, I certainly don't see the economy going in a POSITIVE direction.

I have been 100% correct about the housing market in San Diego and Florida; and will soon be here. The stock market is a whole different animal and I don't think many people possess the wisdom on timing it correctly. Real estate is much easier.

I understand the concept of dollar cost averaging, however, when you are predicting a SERIOUS economic collapse -- I am more than happy to earn 5% and sit back for awhile... then buy up funds and stocks using dollar costing on the way down, at bottom, and then on the way back up again.

In case you hadn't noticed we are NOT in a recession. I agree THAT would be a bad time to pull your money out, because that is when all the other lemmings will be doing the same.

Again, herd mentality.

Same thing goes for real estate. Anyone who purchased in 2004, 2005 and 2006 is, well, a lemming and deserves to fall off the cliff.

synthetik said...

The forclosure link that you posted is no longer in existance.

seattle price drop said...

Synthetik-

I agree with you. The Real Estate market is EASY to time, both tops (which can last a while) and bottoms (which can turn on a hair so you've got to be ready to move when they turn).

All you've got to do is pay attention to what's ACTUALLY happening, not what the PR is.

And if I needed/wanted to sell, I'd rather get out easy at the "beginning" of the top then hang in there for another 6 months to a year when it's clear to every Tom Dick and Harry that RE is toast.

Stocks, forget it. Don't get the logic there.

jcricket said...

Try this link for the foreclosure info. Dunno what happened there.

synthetik: I can understand that you think you'll be successful timing the market (selling before the top and buying in before the bottom). But, and no personal offense, I doubt it will work out as well as you think. When you spend all your time trying to time the market, you usually miss other opportunities, unless you're rich enough to place huge hedge bets on multiple asset classes (a la Soros).

Sure, if you're talking about not buying a house now, there can't be that much downside (worst case, houses cost more than now, best case, they cost less - if you're keeping your money in something that earns a little interest, you're never that hosed). Parking your money in a CD eliminates (for the most part) the risk of losing principle (if your investments are less than $100k and the banks don't explode), but not the risk that you fail to take advantage of rising foreign stocks, or short/intermediate term bonds, etc. Even commodities have risks associated with them.

Personally, I think the difficulty in market timing is highlighted in seattle_price_drop's comments. If the "bottom" can turn on a hair, it's not that easy to time. Too many factors out of your control - and too much risk that when you want to buy, interest rates are higher, your investments have shrunk, etc.

Again, none of this is an argument in favor of buying a house now, just an argument that I think those who are "getting out now" will probably end up worse off in the long run than those that just keep doing what they're doing (assuming that's investing in a diversified set of stocks, bonds, foreign markets, not getting an exotic mortgage, etc.)

jcricket said...

sorry, spd, I missed your emphasis of "And if I needed/wanted to sell" - I agree with the point you made. If I was thinking "gee, I'm gonna move in the near future", then getting out now would be better than in a year.

All I'm saying is if you're not thinking about moving, don't suddenly start because of fear. I'd still do defensive things, like make sure you have emergency cash, fix your mortgage rate (if it's not already), make sure your have foreign stocks and bonds in your asset mix, etc.

synthetik said...

Sorry, no, I am not spending a lot of time trying to time the market. I took a calculated risk.

As far as timing real estate, it is MUCH riskier and harder to try to time WHEN TO SELL vs. when to buy. It's almost silly-easy to understand when to buy. Do I really have to list the indicators again? Basically, everything turns to sh*t, all the media news is bad, -everyone- (herd) thinks RE is a bad investment, foreclosures are at multi-year highs and THERE ARE ALMOST NO BUYERS OR SELLERS. Everyone gives up.

My point is, if you miss the bottom - who cares? You still get a tremendous discount.

If you are TOO LATE to sell, you are supremely fk'd because you may not only be able to sell on your terms, but you may not be able to sell at all. People who miss that window usually keep dropping their price, following the market down - but don't drop it enough to get out quickly enough and therefore lose a crapload of moolah.

Fear is a fantastic motivator. A homeowner has every right to be very afraid right now if they are barely affording their mortgage. If they temper that fear with "wise mind" and do their homework, there should be no issue.

The real estate market moves slowly enough so anyone can make an informed decision.

Unfortunately, most of us listen to our realtor - possibly the worst source of information possible.

To me it's simple. If you are nimble and view your home as an investment - and can afford to uproot your family temporarily - it's a no brainer. Sell your 1700sq ballard home next to the crack house now, make a killing, and rent a 3-bedroom penthouse downtown for 2-3 years while the FEAR and panic set in. Repurchase 2200 sq. foot home on lake union 3 years later for the same price.

Option 2: You've been in your home for years and really love it. Your payments are teensy and you have tweens at home. Stay put!

synthetik said...

As far as the logic in stocks, check out Berkshire Hathaway, the worlds ultimate "fund" class A or Class B shares, BRK.B.

21% annual returns for the last 30 years. Beating the S&P 500 by 11% consistently throughout.

Its the best kept secret of the financial world. Why? Ask any stock broker or fin. planner about the stock. You'd probably get the same answer if you asked a real estate agent about redfin.

redfin who?

jcricket said...

To me it's simple. If you are nimble and view your home as an short-term investment - and can afford to uproot your family at least twice and can afford the moving costs, 6% RE commission - it's a no brainer.

Added some stuff to clarify your statement.

I think you grossly oversimplify moving, and the effects it has on a family.

To me the only reasons to sell now are

A) If you're retiring in the next year or two and want to have as much cash on hand as possible

B) You're a RE speculator (but really, this is the risk they take, can't shed too many tears)

C) You're barely getting by on your IO/ARM payments and are counting on rising appreciation to get you out of PMI, pay off your second loan, etc.

Otherwise I think there's just as much potential downside, both in terms of emotions, missing the top of the market and missing the bottom on the way back up.

synthetik said...

Please don't change my words again, I'd appreciate that shug'.

In the coming RE crash, 6% commission and moving costs aren't going to mean a thing.

Plus, financial ruin, bankruptcy and divorce will be much worse on your children than having to change schools (You could rent in the same district).

As far as missing the "top", we are there right now. Nobody knows when it will happen exactly, but at some point the general populace will decide that the market is moving in the other direction (may have already happenened) - and then, yes, it may be too late.

Like I said, if you are comfortable with your home situation, payments and do not look at your home as an investment (long term or otherwise!), stay put.

Housing can be a long term investment and you can still make changes during incredible peaks and lows that the cycle has. That is not pure speculation - it's smart.

Would you rather buy your long term investment as a "value buy" or at the peak? It does matter!

jcricket said...

For the last time synthetik, I'm not meshugy. Stop insinuating that. I'm pretty sure that's a violation of the posting rules. Moreover, it's bad form, especially considering I haven't similarly questioned your identity/motives/honesty.