patrick.net

wthrfrk80 says

Fair enough. But if the banks don't seem to mind people squatting, why would those houses ever hit the market?

The only way banks would not sell these houses, is if they really thought that prices were going to go up, in the future. But, reality is, prices are dropping, and, soon, will be dropping even faster.

There IS a massive inventory of delinquent mortgages. However, lenders have very little reason to bring them to market, so they just let the existing deadbeat owners continue living in them indefinitely.

The simple fact is that banks will drag their feet on foreclosure almost indefinitely if the home is under-water. The greater the negative equity the less willing the lender will be to foreclose.

To put it another way, it is better for banks to let deadbeats slide and keep the mortgage on the books at an unrealistic valuation rather than start foreclosure proceedings and have to book a loss. Most banks are so capital impaired that recognizing the losses these delinquent mortgages represent would make them insolvent (i.e. bankrupt). When the choice comes down to going out of business or letting deadbeats squat in homes the bankers will ALWAYS choose stay in business (and keep those bonuses coming).

The implication is that we are going to be facing a situation with undercapitalized banks with hidden mine-fields on their balance sheets for 10 or 20 years, as the system slowly works off the bad debt.

No one should expect any kind of "Tsunami" of foreclosures. It is in NO ONE'S interest to see a flood of foreclosures hit the market, so we won't.

The regulators will NEVER pass rules forcing true accounting valuations (which would force half the US lenders into insolvency), and the banks certainly aren't going to voluntarily admit the truth (i.e. by writing down bad debt). The result is a LONG period of a zombified economy with banks, businesses, and borrowers who look like the real thing but are really dead and rotting on the inside.

Ironically, this whole phenomena of zombie banks and companies is EXACTLY what has been playing out in Japan for the last 22 years. Japanese banks and regulators refused to write down bad debt too, and just look where that's led them.

ATK says

however I am sure bank savings interest rates and CD's will still drop from 0.nothing% to 0.even-more-nothing%

Which is a real interest rate of about negative 2.5%, thanks to inflation.

The ONE thing, at least in CA, limiting squatters is adverse possession laws. If banks let it go for 5+ years and the squatters paid all the bills and taxes, the squatters fully own the hose and the bank loses any stake in it. I would be VERY surprised if banks let that happen to even a single house. Maybe they have worked out some strategy to mitigate this with the slowest possible trickle of foreclosure activity, I don't know. Maybe they are just getting ready to sell all of the properties to institutional investors instead.

Mikhail says

Ironically, this whole phenomena of zombie banks and companies is EXACTLY what has been playing out in Japan for the last 22 years. Japanese banks and regulators refused to write down bad debt too, and just look where that's led them.

Sick isn't it? Our futures have been stolen from us. Then again, it's our fault we elect politicians that promise us a "free lunch"...even though that's a violiation of the First Law of economics.

Just think what the unintended consequences of ObamaCare will be.

Mikhail says

However, lenders have very little reason to bring them to market, so they just let the existing deadbeat owners continue living in them indefinitely.

But nobody is living indefinitely. Banks do foreclose, soon or later.

Tim Aurora says

Limited Recovery is taking place. Here in Johns Creek Georgia, the prices never plunged more than 20% and now with the foreclosures out of the way we are recovering nicely.

Here, in the Bay Area, the annual spring dead-cat bounce is definitely over. Asking prices have started heading down, and selling price are soon to follow.

So, we end the month with 500 LESS homes in foreclosure than we started. there were about 20,000 in the pipeline at the beginning of the month, so instead of ramping up, they are actually shrinking? [even in the best of times, there are always a few thousand homes under the threat of foreclosure, at the current pace in a year and half or so, we'd be back to a market with normal foreclosure rates...]

I can sort of see the logic behind the "Mark to Model" valuation scheme, since houses are not assets you sell like cans of soda. (The assumptions used by banks to derive the valuations they come up with are a different kettle of fish. I don't even think they're fully disclosed, but I could be wrong.)

But wouldn't it be nice if somewhere in the 50,000 pages of crap in today's 10-Ks and annual reports there was a requirement that banks at least take a crack at a "Mark to Market" figure in the Notes to the financials?

Anyhow, if we had numbers like that maybe we could get a feel for things. Personally, I think it would be pretty awful, but you must think differently, I guess, that the writedowns banks have already taken have left the real estate on their books at something close to fair value. Is that a reasonable take on your views?

But, what I'm really curious about is why you think it is reasonable to assume that the data for one month can be extrapolated out to each month for the next 18 months? That I'm mystified over. Can you explain how you arrived at such a conclusion? Thanks.

I don't know about Phoenix. But when I see someone who is making 30,000 to 40,000 a year think their old rotting shack is worth 449,000 or more, while in an area where family incomes are not breaking 40,000/year. I'm pretty sure it's a crash waiting to happen.

robertoaribas says

bitter and pissed off, because you screwed up in your timing!

No, I think your mother screwed up in her timing.

Dunross seems to be arguing that a forclosure tsunami is coming because:

1) Banks DON'T want to put houses on the market (because then they would lose money)

2) Banks DO want to put houses on the market (because otherwise they would lose money)

Needless to say, I don't follow the argument...

wthrfrk80 says

Dunross seems to be arguing that a forclosure tsunami is coming because:

I never said that a tsunami of houses on the MLS is coming. I simply said that the shadow inventory is growing, not shrinking, like the realtard tries you to believe. The tsunami is in the shadow, not out in the open, but this shadow is what is going to keep the prices going down for decades.

dunnross says

No, I think your mother screwed up in her timing.

My goodness. How does speculation on future price movements become personal? Wall Street guys might be ruthless scumbags but they probably don't have time to engage in personal attacks with other speculators. They place their bets on computer screens and let the chips fall where they may.

Bulls: place your bets
Bears: place your bets

Only time will tell who is correct.

dunnross says

I simply said that the shadow inventory is growing, not shrinking, like the realtard tries you to believe. The tsunami is in the shadow, not out in the open, but this shadow is what is going to keep the prices going down for decades.

Don't get me wrong. I'm not trying to defend Realtors and their shenanigans. But how do you know the shadow inventory is growing? Is there evidence/data to show this?

wthrfrk80 says

But how do you know the shadow inventory is growing? Is there evidence/data to show this?

Let me ask you this question: if you see more cars coming into the tunnel, but less cars coming out, do you actually have to walk into the tunnel to say that the number of cars in the tunnel is piling up? No, you don't, because, unlike our friend, the wannabe mathematician, you have grasped the basic concept of queuing theory.

I've heard that the SF light rail is significantly slower than the old street cars of 100 years ago. That's not very good progress.

Mark Hansen has a pretty good recount of the current status quo, and what's to come in the pipeline. In fact, Mark confirms exactly what I was trying to tell you people for over 4 months, now. Basically, the market has come to a halt. This is a very very sick market, and the shadow inventory is going to continue to bloat, prices will continue to sink, and housing recession is here to stay for a very long time:

http://mhanson.com/archives/839

dunnross says

Let me ask you this question: if you see more cars coming into the tunnel, but less cars coming out, do you actually have to walk into the tunnel to say that the number of cars in the tunnel is piling up?

No. In fluid dynamics, they call that the Continuity Equation.

Do you have data that shows there are more houses being sold than bought or something?

John Bailo says

Then somehow the urbist convinced us that this crap was worth it because you get to ride light rail!
Now the sleep falls from your eyes and you're seeing cities as the cramped hellholes our parents fled..for just cause!!

Are you talking about Portland, OR?

I've heard that the SF light rail is significantly slower than the old street cars of 100 years ago. That's not very good progress.

That's because there were fewer lawyers 100 years ago. ;-)

One example from the street here in LA, I just met someone who bought a condo in West Hollywood, a prime bubble area in 2005 for 750K, it's now worth 400K at best.

He would squat, but the HOA kicked him out.

This was over two years ago, the condo is still vacant, the foreclosure process is still going on, and it is not on the market.

wthrfrk80 says

Do you have data that shows there are more houses being sold than bought or something?

Roberto the realtard, himself, showed you how NOTs have come down from 10,000 to 3,000 in Phoenix. This is a huge, huge drop in your fluid outflow. You can also see the graph, here:

http://margesellshorseproperty.com/channels/regional_localism/topics/maricopa_county_az_decreasing_trustee_sales

However, NOD data is skillfully hidden from us, by the RE Cabal, but I will argue, that since, banks are letting people squat, and are not releasing the inventory, more and more people are starting to realize that squatting is a profitable proposition, which can only cause the NOD's to go up.

robertoaribas says

hmmm, so you know more about the home value that you don't even know the address of, than the owner? do you have ESP? The quote actually shows what you are: bitter and pissed off, because you screwed up in your timing!

It's my house and I am NOT giving out the address! I'm very happy indeed and am laughing at most people on this board... I think prices will go down in the near future, but we were lucky in our purchase...

sheltielover1 says

hmmm, so you know more about the home value that you don't even know the address of, than the owner?

Well, I do know it's in the Bay Area. This tells me that it's either a sh*t hole in a ghetto with some positive cash flow, or it is much more expensive to buy than to rent.

dunnross says

sheltielover1 says

hmmm, so you know more about the home value that you don't even know the address of, than the owner?

Well, I do know it's in the Bay Area. This tells me that it's either a sh*t hole in a ghetto with some positive cash flow, or it is much more expensive to buy than to rent.

You're a real idiot... It's a beautiful, large home in Danville. We got lucky.. Prices are a ripoff right now.. We could easily rent it for positive cash flow..

sheltielover1 says

We got lucky..

Oh Yeah. Somebody died and left you their inheritance. Have you heard that if things are too good to be true, they probably are?

dunnross says

sheltielover1 says

We got lucky..

Oh Yeah. Somebody died and left you their inheritance. Have you heard that if things are too good to be true, they probably are?

jealous idiot... It's the truth.. A series of factors came into play and we got the house for a great price. End of story.

sheltielover1 says

A series of factors came into play and we got the house for a great price.

Yes, and the house you bought even came with the free U-238 rods skillfully buried under it. Just make sure you don't breath anywhere close to the kids bedroom.

dunnross says

sheltielover1 says

A series of factors came into play and we got the house for a great price.

Yes, and the house you bought even came with the free U-238 rods skillfully buried under it. Just make sure you don't breath anywhere close to the kids bedroom.

No kids... moron...

Sheesh...it's a real-estate discussion.

sheltielover1 says

No kids... moron...

Well, then, you should be fine. Just make sure you don't have any in the future, unless you like 2-headed kids.

sheltielover1 says

No kids... moron...

I guess your house doesn't have a kids bedroom, either. What a fine house you got!

Sweet, two new additions to my p.net ignore list!

It looks like someone's pre-teen kids found their parent's p.net account and are pretending to be them after hearing mommy & daddy argue about the house or something!

I'd put in my $0.02 but i need to borrow $0.10

When rents went up across the board, that was the end of foreclosures, investors who bailed in 2008 came right on back and are just buying the places outright. Why?, credit is still very loose, and if you have a cash flow and good credit, anyone can get into buying RE. Underwater?, so what, keep holding out for some kind of personal bailout, refinance at lower rates and hope for better days. Property management should be booming going forward. The RE market, in many ways has not changed a bit, flippers are still buying the bottom of the barrel actual foreclosure junk, people are still paying market values. The only thing I'm seeing different is more people living in less house, probably due to rental price increases and wage stagnation. I also see quite a few more campers sitting in driveways, and being used. Two car garages have no room for cars, that's where people store all their crap.

everything says

The RE market, in many ways has not changed a bit, flippers are still buying the bottom of the barrel actual foreclosure junk, people are still paying market values. The only thing I'm seeing different is more people living in less house, probably due to rental price increases and wage stagnation. I also see quite a few more campers sitting in driveways,

Exactly, it's a Tsunami of homeless people and people living in cars, yet, houses and condos are still expensive with mostly investor flips to choose from if you want to buy..

F this. they can keep their properties.

Wouldn't the retirees & baby boomers be another member of the "shadow inventory"?

They'll have to sell regardless of equity or if they missed the top of the bubble. These houses, long outgrown by the old grinders will further depress housing prices and would have regardless of the bubble.

Underwater mortgages, temporarily modified mortgages, unemployment still very high, savings drained, old folks counting on their houses for retirement, and more foreclosures in the pipeline...

Even if the banks aren't colluding, there's a slow train comin'...n'est-ce pas?

Roberto,
Have a look at the Seeking Alpha piece that Patrick posted today. Phoenix seems way ahead of the curve in terms of how much prices have already crashed, such that a modest rebound could be possible. But I wouldn't argue that Phoenix (or Vegas or Orlando) are the norm in this trend.
Regarding foreclosures, my impression is that it's common knowledge that banks are holding back a very large number of distressed properties in many markets in order to prevent price collapse. It's possible that Phoenix is ahead of the curve there also. The general question is how long can banks sustain the expenses of keeping their distressed inventory off the market before some kind of tipping point is reached.
As a first time home buyer on the pricey east coast, I certainly wish that some rapid deflation in prices might bring prices back to normal values with respect to incomes, since logic says that should occur. But I won't be holding my breath-- I'm more likely to be leaving NYC than going down for a million dollar shoebox.

HEY YOU says

I'd put in my $0.02 but i need to borrow $0.10

Send your -8 cents to a Nigerian banker and they'll send you a -million dollars.

Ignatius, against many people's belief the banks are NOT holding back foreclosures to prevent a market crash. The ONLY reason they take up to 1,2,3,4 or 5 years after you stop making your mortgage payment is that they CANNOT AFFORD to take all the losses at once. If Bank of America would foreclose today on their 1-2 Million non-paying customers the FDIC would shut down Bank of America the very next day. It's all about balance sheets. If you currently owe $800k on your mortgage it shows on their books a beautiful $800k on the asset's side. Once they foreclose and the value of your house is a sloppy $400k they would have to write off an almost half million Dollar loss. And of course they cannot afford to take a million of these huge losses within in a short time period. Banks that are doing really well however foreclose pretty quick, like HSBC bank for example. The "holding back" of the banks is actually only depressing the market further because it encourages people to stop paying their mortgage in order to live for free for a few years.