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If people would just quit financing home purchases and pay cash....

joshuatrio says

If people would just quit financing home purchases and pay cash....

Yea and if pigs would only start flying...

joshuatrio says

If people would just quit financing home purchases and pay cash....

If you got rid of these things:
- FHA
- below 20% down mortgages
- the ability to squat 1-3 years in a short sale home (at most 90 days after NOD)

Housing would return to normal within a year.

joshuatrio says

If people would just quit financing home purchases and pay cash....

Oh it's coming. Once govt. will not have anymore money to buy out bad mortgage securities - cash will be King.

cc0 says

these might be the last wave of the 5-year ARMs coming to market.

Weren't there plenty of 7 year ARMs too?

CL says

Weren't there plenty of 7 year ARMs too?

I don't recall those, but they may have existed. 1, 3, and 5 were the popular terms. I put the peak of the bubble around this time in 2006, the 5-year ARM resets happened in 2011. A lot of these actually reduced payments because rates are so low now, but some of them had balloon payments due.

I'd have to go digging for data but because rates started rising and these ARM people haven't been able to refinance because of negative equity their rates have likely been going up as well, which is reason enough for the FedRes to buy more MBSes and try to drive down rates.

Foreclosures in this area have picked up a decent bit (50-80%) from this time last year, but are down considerably from the peak years ~2008.

I think the plan is to keep rates low and keep the housing trickle slow so as not to depress prices further; as the market lifts and enough people can get their mortgage within current values, they can refi into fixed rates and then the normal foreclosure process can resume, leaving only the poorest to get evicted.

Problem is, this process could very well take a decade; meanwhile, I think we're seeing a floor, at least in certain markets.

APOCALYPSEFUCK is Shostakovich says

Are you shitting me?

We haven't begun the first wave.

Precisely! 100% correct without a single question of validity in my opinion.

Goran_K says

joshuatrio says

If people would just quit financing home purchases and pay cash....

If you got rid of these things:

- FHA

- below 20% down mortgages

- the ability to squat 1-3 years in a short sale home (at most 90 days after NOD)

Housing would return to normal within a year.

No it would not because these three issues cannot be wiped out. Why?

1. The masses are too depended on FHA and their bullshite.
2. Today far less than 1% have 20% down and those who do aren't going to pay a single cent over REAL market value. (This does not even speak of the 1% of 1% who actually have good credit. Also the job market is in shambles. These are two issues I won't even factor into the equation unless we want to turn three into five.)
3. They cannot control that because it is too pervasive. There will always be these types.

bubblesitter says

joshuatrio says

If people would just quit financing home purchases and pay cash....

Oh it's coming. Once govt. will not have anymore money to buy out bad mortgage securities - cash will be King.

DO YOUR MATH

bubblesitter says

joshuatrio says

If people would just quit financing home purchases and pay cash....

Oh it's coming. Once govt. will not have anymore money to buy out bad mortgage securities - cash will be King.

DO YOUR MATH

Partially true. When you think it through, and based on results, the counterfeiters are king.

cc0 says

these might be the last wave of the 5-year ARMs coming to market.

5 year ARMs started in 2007 would probably get *cheaper* if they reset today. LIBOR is _far lower_ today than it was in 2007 (4-5% less). Many loans are indexed against LIBOR, so they should drop significantly, I would think. (and no matter what rate they are indexed with, it's surely lower today than in 2007)

swebb says

5 year ARMs started in 2007 would probably get *cheaper* if they reset today.

I'm pretty sure I said that:

cc0 says

the 5-year ARM resets happened in 2011. A lot of these actually reduced payments because rates are so low now, but some of them had balloon payments due.

I'd be interested in your thoughts on what else I wrote there though.

cc0 says

I don't think that prices in Florida can fall substantially further.

It can and it will in South Florida. The market here is severely sick and crippled. Underwater owners hoping some cash rich Canadian or South American will save them. It's almost impossible to get a conventional loan here and even if you do the house won't appraise anywhere near the asking price. FHA is still making risky loans but too many are falling through. The only people Realtors take seriously is cash buyers and except for the oceanfront condo market there aren't that many of them. See http://ewm.com/trends

cc0 says

I'm pretty sure I said that:

cc0 says

the 5-year ARM resets happened in 2011. A lot of these actually reduced payments because rates are so low now, but some of them had balloon payments due.

I'd be interested in your thoughts on what else I wrote there though.

I was responding to your original post where you suggested the increase in foreclosures was triggered by ARM resets.

cc0 says

these might be the last wave of the 5-year ARMs coming to market.

I'm not sure why you would think 2012 would be so different from 2011 in that regard.

As far as other thoughts...If the 5 year ARMs were resetting higher, I still wouldn't expect that to result in a foreclosure bump so soon -- unless the banks are changing the way they pursue foreclosures (processing the recently delinquent loans before attacking the backlog.) But I don't know how the industry works and who holds the ARMs vs who holds the conventional loans, etc.

As for the balloon payments on 5 year ARMs -- I wasn't aware of that being common practice, so I hadn't considered that it could be a trigger -- but it sure could be, as many of the ARM borrowers likely couldn't qualify to re-finance the balloon and would go delinquent even if they would have otherwise continued paying. Any idea what percentage of 5 year ARMs had a balloon payment at 5 years? (I once had a second mortgage amortized over 30 years, but with a balloon payment due at 15 years -- not sure how common that is.)

My guess is this "wave" isn't going to change things much. The bigger question is what happens to all of the existing foreclosures / delinquent houses that have happened in the past several years -- the extra foreclosures may make the problem worse, but a secondary factor at best. Of course that could change with the number...2 million foreclosures per month -- that would be a big deal.

Goran_K says

joshuatrio says

If people would just quit financing home purchases and pay cash....

If you got rid of these things:

- FHA

- below 20% down mortgages

- the ability to squat 1-3 years in a short sale home (at most 90 days after NOD)

Housing would return to normal within a year.

The only problem would be what is normal. My guess would be about 30-40% price reduction from where we sit today. Doing the above 3 things would remove the smoke and mirrors from the equation and make us all realize how crappy this housing economy really is today. Even the Asian buyers would disappear. ;)

swebb says

I'm not sure why you would think 2012 would be so different from 2011 in that regard.

It seems to take ~12-18 months for a foreclosure to show up at auction, and I'm seeing an increase in foreclosures at auction now. It seems something is pushing them higher suddenly.

I was never in the origination market so I don't know all loan details, but a lot of people were buying houses with 80% equity by getting 25% seconds, using the extra 5% for closing costs & renovations. I don't know how many ARMs were secondaries, but I haven't done all the title work to see if the current foreclosing entities are firsts or not, either.

Many ARMs were below-market rates, though, and when they reset you had to make up the difference in lost interest. This is what I refer to as the 'balloon'. A quick search online doesn't find the data, but I do see references to 7 and even 10-year ARMs as well. If I recall, these products weren't significantly cheaper than a 30 fixed so I may have just forgotten about them.

RentingForHalfTheCost says

The only problem would be what is normal. My guess would be about 30-40% price reduction from where we sit today. Doing the above 3 things would remove the smoke and mirrors from the equation and make us all realize how crappy this housing economy really is today. Even the Asian buyers would disappear. ;)

I like ThomasWong's definition: 1995 + 1.5 appreciation. That being said, if the 3 things I mentioned disappeared, we would get even lower prices. It's kind of eye opening how far the government has reached to prop up this market.