82CardsGrad

Not sure why, but as dire as this report is, I actually believe things will be worse...


By JAMES R. HAGERTY

Associated Press
Some bank-owned homes have sparked bidding wars recently in Las Vegas, but pending foreclosures are likely to increase the supply.

Despite some tentative signs of recovery, the U.S. housing market remains vulnerable to further price drops—especially in areas where large numbers of mortgages are headed toward foreclosure over the next few years.

The Wall Street Journal's quarterly survey of housing-market data in 28 major metro areas shows sharp drops in the number of homes listed for sale across the country. But the potential supply of homes is far larger because banks are likely to acquire significant numbers of foreclosed homes in some areas, notably Las Vegas, Atlanta, Detroit, Phoenix, Miami and other parts of Florida, and Sacramento, Calif., over the next few years.
Sales of those homes may depress prices further. By contrast, metro areas with relatively low foreclosure and mortgage-delinquency rates include Boston, Denver, Minneapolis, San Francisco, Seattle, Raleigh, N.C., and Portland, Ore., making them less vulnerable.

Where Housing Is Headed
See The Wall Street Journal's quarterly survey of housing-market data in 28 major metro areas.
Homeowners and potential buyers have been whipsawed by conflicting signals about the state of the market in recent months. Ulani and Mike Thiessen found the market surprisingly hot when they went shopping for their first home in Las Vegas during the summer. With the help of Kim Kelly-Reed, an agent from One Source Realty & Management, the Thiessens finally bought a foreclosed house in September for about $136,000—but only after being outbid on three other houses.
"It's a crazy market out there," says Ms. Thiessen, who works for an electrical contractor.

Despite a continuing surge in defaults, there is a shortage of well-preserved foreclosed homes on the market in Las Vegas, Sacramento and some other metro areas where first-time home buyers have been competing with investors for newly affordable properties. "Anything under $300,000 that is decent within hours has dozens of offers," says Michael Lyon, CEO of Lyon Real Estate in Sacramento.
The supply of foreclosed homes listed for sale has dwindled largely because of government-mandated efforts to save as many borrowers as possible from losing their homes. That campaign has gummed up the foreclosure process, slowing the flow of houses into bank ownership—but only temporarily.

Over the next few years, housing analysts believe, millions of other homes are heading for bank ownership, but no one can say how long that will take or when a sudden torrent of bank-owned properties may swamp certain local markets.

Nearly 27% of first-lien home mortgages are at least 30 days overdue or in foreclosure in the Miami-Fort Lauderdale area, according to research firm LPS Applied Analytics in Denver. The rate is 23% in Las Vegas, but about 8% in Denver and Seattle. The national average is 12.4%, up from 5.2% at the end of 2006.

Among the millions of homeowners whose fate remains undecided are Jill and Robert Loy, who live in Scottsdale, Ariz. They bought their home in 2004 for $630,000 but figure it is now worth only about $350,000, well below the $470,000 owed on their mortgage.

Falling Behind

The couple fell behind on their loan payments last spring when Ms. Loy was temporarily jobless, and they have been trying to work out a modification of their loan terms with the company that collects payments on their mortgage, Colonial Savings FA of Fort Worth, Texas. A Colonial spokeswoman says the bank is trying to help the Loys.

Concentrated Risk
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The housing market is heading into the winter doldrums—when fewer people shop for real estate—after a summer marked by strong demand for low-end to midrange homes, spurred by a temporary federal tax credit for first-time buyers. How the market fares in the spring will depend largely on the state of the economy and the pace of foreclosures.

"The number of people receiving paychecks will drive the demand for houses and apartments," Jay Brinkmann, chief economist for the Mortgage Bankers Association, said Tuesday in testimony to the Senate Banking Committee, "and the recovery will begin when unemployment stops rising."

For now, the market seems to be stabilizing, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. But if the job market gets much worse and mortgage rates rise sharply, "that could be the tipping point" for another drop in prices.

Mark Zandi, chief economist at Moody's Economy.com, predicts that average national home prices will bottom out in next year's third quarter, assuming that employment begins growing again in mid-2010. But prices in some metro areas still have a long way to fall, he believes. Prices in the second quarter of 2010 will be down about 30% from a year earlier in Miami, 27% in Orlando, Fla., 24% in Las Vegas and 23% in Phoenix, Moody's Economy.com forecasts.

Foreclosures and short sales (in which a home is offered for less than the mortgage balance) dominate the markets in some metro areas. Satish M. Mansukhani, a market strategist in New York, estimates that such "distressed" homes account for 79% of home listings in the Detroit area and 75% in Las Vegas, but just 16% in Houston and 7% in Boston.

One big question is how much more the federal government will do to prop up housing. Congress is debating whether to extend the tax credit for home buyers beyond Nov. 30. Meanwhile, the Federal Reserve is phasing out its massive purchases of mortgage-backed securities and plans to conclude the program by the end of March. Those purchases have helped keep interest rates on 30-year fixed-rate mortgages around 5%. Mr. Zandi says mortgage rates are likely to rise as much as one percentage point after the Fed ends that support. Analysts at Barclays Capital in New York forecast mortgage rates will be slightly over 6% by the end of March.

High-Priced Home Glut

While supplies of moderately priced homes have shrunk, there is still a glut of high-priced houses in many areas, suggesting that prices on those properties may fall sharply as more owners default. In Sacramento, there are enough homes on the market at $600,000 and above to last more than 15 months at the recent rate of sales, compared with just 1.5 months for homes priced at $300,000 and below, according to Lyon Real Estate.

Home sellers will also face tougher competition from landlords, who generally have been cutting rents in the past year. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. It predicts "a few more quarters of distress, lower rents and higher vacancies."

Apartment rents may face further downward pressure as investors buy foreclosed single-family homes and turn them into rental units, says Ryan Severino, an economist at Reis, who notes that there is little data on the number of houses being converted into rental properties.

conraddobler

The amount of people in trouble is simply staggering.

I'd say back of the envelope WAG wise I'd guess 20 percent or more of people are at the ends of their financial ropes.

It's hard to gauge really but just based on the applications I get that's my guess for the extent right now of this mess.

That's a ton of people although still the minority the longer this drags on the more get drug down.

It's a marathon of financial survivial.

__________________
When written in Chinese, the word "crisis" is composed of two characters. One represents danger and the other represents opportunity. John F. Kennedy

DWKB

I'm pretty isolated here in little ole Arkansas. Housing is stable or rising, unemployment is lower than the national average and has quit rising. We have plenty of deer and bass and isolated woods should the zombie Apocalypse happen.

__________________
"[Rock Chalk Jayhawk] is the greatest college cheer ever devised" --Teddy Roosevelt

jefftheshark

It's funny but my brother-in-law that lives in Vegas was talking the other night about some property he bought in Arkansas a couple of years ago. Now he's seriously thinking of moving there because of the very things you mentioned. The only thing keeping him here is his job, which is hanging by a thread, (he'll be lucky if his employer doesn't fold by the end of the year).

My first thought was, jeez, I wonder if the people in Arkansas are ready for the onslaught of unemployed people who are soon going to be moving to their state and destroying the very reasons they moved there.

JTS

conraddobler

Re-read the Grapes of Wrath and reverse the journey and you have it about right.....

__________________
When written in Chinese, the word "crisis" is composed of two characters. One represents danger and the other represents opportunity. John F. Kennedy

jefftheshark

Here's a article that discusses the next phase of the residential problem, the new first-time buyers who will be virtually indistinguishable from the sub-prime borrowers in several years: Link

And here's another article that discusses the current abuses of the $8,000 first time buyers credit. Some highlights:

-“The Treasury tax-oversight office said at least 19,000 filers who hadn't bought homes claimed $139 million in tax credits and were reimbursed.”

-“Treasury oversight officials said they have found an additional 74,000 tax-credit claims, valued at $500 million, where evidence of previous home ownership could make their claims invalid.”

-“More than 500 people under the age of 18, including a 4-year-old child, also had their names on applications for the credit, which has no minimum-age requirement.”


WSJ

JTS