Foreclosures coming to your neighborhood

If you think you are (and will be) immune from the coming foreclosure tsunami, you need to check out realtytrac. The (P)re-foreclosures and (A)uctions on the map will point the way to future REO (B)ank-owned properties -- and will force your neighborhood prices to be lowered all around.

Here in Orange County, CA, we have seen homes owned by bank (REO) be listed for 40+% off. For example, one home we saw was bought for $600K last year (Feb 2007) and the bank repossessed the home and put it on the market for $325K last month (May 2008) and it went pending in matter of days.

And just yesterday I saw home (surrounded by "P"'s and "A"'s and "B"'s) for sale with the following notes:

Looking for a Steal? Well, STOP LOOKING!! YOU FOUND IT! This is NOT A FORECLOSURE & NOT A SHORT SALE! MOTIVATED SELLERS Want this Home Sold TODAY!!! [details deleted] Did YOU SEE THE PRICE?? It's NOT A MISPRINT and YOU Are Not Dreaming. LOWEST PRICED Regular Sale Property Around! Bring your checkbook! HURRY!!!

So, all those foreclosed homes will lower the comps and hurt normal sellers. These days, all the normal sellers stand out since their asking price is something like $100K or $200K higher than short sale or REO prices. In fact, just few blocks away from this above home was another normal home for sale with about the same spec except the list price was $200K higher!!!

And to think that we've just reached the end of the beginning of this downturn: we'll be getting bank failures, company failures, personal bankruptcies, unemployment and/or lower hours/paycheck, higher taxes, lower pension payments, and more foreclosures/REOs. I personally believe that this downturn will be long and painful: Great Depression II or GDII.

Copyright 2008, DannyHSDad, All Rights Reserved.

Financial Mess in Graphics

Here's a graphical image of how bad things are across the US (from NY Times) as of December 2007. And to think we're just getting started with interest payment resets. We going to be in a world of hurt once all those funny mortgages reset to new payment schedule.

Copyright 2008, DannyHSDad, All Rights Reserved.

Housing Crash: Foreclosure increasing

RealityTrac has a great map of USA with where the foreclosures are taking place. Click for it details.

We're just getting started since various ARM resets will take place over the next 4 years, and as these loans resets, people will find that they cannot pay their mortgage. That is, it's one thing to see a rise of few dollars or even $200, but when it resets at 50% or 100% of current payment, then it seems impossible and people have been and will continue to abandon their mortgages. And, if these reset charts are any indicator, things are going to get ugly for the next few years.

Keep in mind that foreclosure process takes months if not years to go through (and doesn't help when politicians put out moratorium to halt foreclosures -- the pain is delayed and made worse in the long run).

Some think that rents will go up with rising foreclosures but that's a mistaken notion. People will return to their parents or double up with their relatives (siblings, children, grandparents, etc.) -- so the demand will decline. The foreclosed homes will eventually turn into rentals. People who cannot sell their homes will turn into rentals. Which means that rental supply will increase (along with lowered demand), and all this will translate into seeing the rents get lower and lower.

The coming recession/depression will not be pretty, in my opinion....

Copyright 2007, DannyHSDad, All Rights Reserved.