Thursday, August 6, 2009

1 in 10 Californians With Home Loan Are In Default

With California's default rate climbing to a staggering 9.5%, it makes you wonder how prices could rebound with the flood of foreclosures adding to the unsold inventory. Tim Iacono from The Mess That Greenspan Made, writes about a couple of prominent housing market experts that apparently don't fear the falling knife of home prices, having recently purchased property despite the scary housing climate.

I wonder if Peter Hong at the Los Angeles Times has any doubts or regrets about buying a house back in November as recounted here, a story that, surprisingly, shows up near the top in a Google search on Peter Hong buys a house.

It would be only natural to have at least a couple of weird thoughts rolling around in your head, especially when you have to write about stuff like this in order to pay your mortgage:
California's default rate soars to 9.5%
Delinquencies in June are up sharply from a year ago, when 6% of borrowers were behind on their loans.
By Peter Y. Hong

About 1 in 10 Californians with a home loan is now in default, and there's growing evidence that the mortgage meltdown is spreading to commercial real estate.

The home mortgage delinquency rate -- the percentage of borrowers who have missed several payments and are in the first stage of foreclosure -- climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.

The staggering number of home mortgage defaults probably will lead to large numbers of foreclosures through at least this year, housing experts say.

"It's probably a given we'll see a high number of foreclosures in the next couple of quarters due to the level of defaults plus the recession and jobs lost. There's plenty more pain to come," said Andrew LePage, an analyst for real estate research firm MDA DataQuick of San Diego.
At least he's not like the serial bankruptcy Edmund Andrews family of the New York Times...

Peter's story was actually quite interesting - about what he and his wife went through in buying a bank repo and their desire to simply have a place they can call their own after selling their condo back in 2005 and renting for a few years.

I wonder whether, if he knew then what he knows now, he'd have made the same decision.

If unemployment weren't such a pernicious problem in the entire state of California, maybe things would look a little different, but falling home prices and rising unemployment tend to feed on each other.
Foreclosures should pick up even more now that various government moratoriums and voluntary foreclosure freezes by lenders have expired.

But LePage said the rate of foreclosures may not reach the record level set last year if lenders increase loan modifications or approve more "short sales," in which homes are sold for less than their mortgage amounts.

The mortgage delinquency rate in June was up sharply from a year ago, when 6% of California mortgages were delinquent and 5.2% in Los Angeles County were in default.

Like Dean Baker, who reportedly bought a house recently so he could enjoy it before the summer ended, Peter may find that he could have bought an even better house for the same money or the same house for less if he'd just waited another year or two.
Dean Baker, the prominent Washington, D.C., housing economist who saw the bubble coming and sold his condo in 2004, recently bought a house. Baker said he thinks the market still has more room to fall, but he wanted to enjoy his backyard this summer and was willing to pay a premium if it comes to that. He said he's OK with a 5% to 10% further decline in his home value, but "if it goes down 20% I'll be upset."
With the prospect of housing price bottoms being such long and drawn out affairs, is it really that important to be able to paint a room the color you want? You can buy a lot of happiness for the probable tens of thousands of dollars that both Peter and Dean would likely have saved by waiting another year or so.

The falling knife of house prices is clearly not dropping as fast as it was a while back, but it is definitely still falling, despite what you may have read in the mainstream media this week.

This post was republished from Tim Iacono's blog, The Mess That Greenspan Made.

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