Thursday, January 13, 2011
Housing Crisis Climax
Today, the most read story on Bloomberg was "Foreclosure Filings in U.S. May Jump 20% This Year". It is reproduced below. The tale tells it all.
Quite simply, we all still falling into the abyss. In the end, more than 10% of homes will have been repossessed in the U.S. in five years. No wonder there is still a feeling of recession out there among the population. Banks' assets will remain shaky until homes prices hit their true bottom: some banks will go under won't, many will continue reigning in lines of credits from SMEs and most won't lend to even credit worthy borrowers.
With homes no longer available as ATMs to finance project or consumption, there is very little business creation and very little chance that entrepreneurs of existing SMEs will take the risk of hiring. Moreover, while consumption remains under pressure, even big firms with tons of cash will resists investing; at least in the U.S..
As the article mentions, the end is near but the worst pain is still to come. The hope is that the stimulus will ease the pain. My fear is that is may prolong the agony.
Here is the Bloomberg story:
"The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.
"“We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery,” Rick Sharga, RealtyTrac’s senior vice president, said in an interview at Bloomberg headquarters in New York. “But it’s probably not going to feel good in the process.”
"A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, the Irvine, California-based data seller said today in a report. The number climbed even after a plunge in filings in the last part of the year -- including a 26 percent drop in December -- as lenders came under scrutiny for their practices.
"Foreclosures have weighed down U.S. housing prices as the nation’s unemployment rate is stuck at more than 9 percent. Home values may rise 0.6 percent for the year, the first annual jump since 2006, according to Fannie Mae, the largest U.S. mortgage buyer. They have fallen as much as 33 percent since peaking in 2006, based on the S&P/Case-Shiller Index of 20 cities.
"Banks seized more than 1 million homes in 2010, according to RealtyTrac. That was up 14 percent from a year earlier and the most since the company began reports in 2005.
"About 3 million homes have been repossessed since the housing boom ended in 2006, Sharga said. That number could balloon to about 6 million by 2013, when the housing market may “absorb the bulk of distressed properties,” he said.
"“What makes this almost inevitable is the fact there are 5 million seriously delinquent loans not yet in foreclosure,” Sharga said. “They’ve got to eventually get in the pipeline unless the homeowners cure the defaults.”
"The foreclosure crisis is the biggest threat to U.S. economic growth, according to Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania. Lender delays in processing defaults may prolong a decline in home prices, he said in an interview this week.
"As many as 250,000 foreclosure filings that would have occurred at the end of 2010 were delayed by the ongoing probe into lender practices, according to RealtyTrac. Those proceedings will be pushed into this year, resulting in an “ugly” first quarter, Sharga said.
Attorney General Probe
"Attorneys general in all 50 states are investigating whether banks and loan servicers used faulty documents and signatures on loan documents, a process that has come to be known as robo-signing. Companies including JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc. halted some repossessions as they reviewed their procedures.
"Foreclosure filings in December totaled 257,747, the lowest monthly tally since June 2008. The number fell 2 percent from November and 26 percent from a year earlier, the biggest annual decline in RealtyTrac records.
"In Florida, among the states most affected by delays because the courts oversee foreclosures, filings plunged 54 percent from a year earlier to the lowest level since July 2007.
"Total U.S. filings in the fourth quarter fell 8 percent from a year earlier to 799,064. The tally for the three-month period was the lowest since the fourth quarter of 2008.
"Nevada had the highest U.S. foreclosure rate in 2010 for the fourth consecutive year, with more than 9 percent of the state’s households receiving a filing. Arizona was second at 5.7 percent and Florida third at 5.5 percent.
"California’s rate was 4.1 percent, Utah’s was 3.4 percent and Georgia’s was 3.3 percent. Michigan, Idaho, Illinois and Colorado rounded out the top 10.
"Five states accounted for 51 percent of the U.S. filing total, with almost 1.5 million. California led with 546,669, down almost 14 percent; Florida was second at 485,286, down 6 percent; and Arizona was third at 155,878, down 4 percent.
"Illinois ranked fourth at 151,304 and Michigan was fifth at 135,874, both down about 15 percent from 2009.
"Georgia, Texas, Ohio, Nevada and New Jersey also ranked among the top 10, said RealtyTrac, which sells data from counties representing 90 percent of the U.S. population."
Reporters on this story: Dan Levy in San Francisco (firstname.lastname@example.org) and Prashant Gopal in New York (email@example.com) and editor responsible for this story: Kara Wetzel(firstname.lastname@example.org)