Foreclosed homes sell at 27% discount in U.S. as REO supply increases
Almost a 30% discount is nothing to shake a stick at when purchasing a home from foreclosure. Prices are still high for where the economy and market is at in 2010. With unemployment guaranteed to rise higher and the market selling off because of the debt crisis and uncertainty, we should expect more foreclosures in the coming years.
Home prices will continue to fall and will most likely stabilize near the pre-bubble prices of 2002. Too many jobs have been sent over seas and our industrial section has been reduced to a point where the broad portion of the real estate market is priced too high for most people who would be looking to own a home. We should look at this continuing correction as a positive move for the future. The quicker we let the market correct, the faster a durable recovery in the U.S. real estate market will take place.
We must remember that over the life of a 30 year mortgage, you are paying between 2.5-3 times the price of the home through interest charges to the bank. A dollar saved on price will save you an additional $1-2 dollars in interest over the life of the loan and that last thing we need to do is pay more than we have too for borrowing money.
Bloomberg - Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.
Popularity: 1%
U.S. Real Estate Shadow Inventory May Stall Recovery
Housing Watch - Shadow inventory is real estate to sell that we don’t yet know about. It’s made up of homes that soon will be on the market, but not for the usual reasons.
It includes homes that are usually several months in arrears on their mortgage and about to hit the foreclosure circuit; homes that are 90-plus days delinquent and currently languishing in foreclosure; or bank-owned (REOs) that have not yet been put on the market. But come on the market they will, one way or the other, and at greatly discounted prices – distressed or short sales.
These houses will keep our values flat as long as they exist. How?
Popularity: 1%
Bank of America boosts staff handling troubled loans by 2,000
This is the reality for what is needed to handle this real estate crisis. We have chosen not to let people default so home will be foreclosed on and that would bring prices down across the board. We have chosen the path of modify home loans and re-writing principal balances. I still support homeowners that actually have the means to support the mortgage and we should keep them in their homes. If not then we need to face the fact that the home needs to be foreclosed and put back on the market at a fair value.
Hopefully the 18,000 employees that BofA has put in this division will help move through the massive backlog of defaulted homes they have on their books. Currently interest rates are extremely low levels so if people can refinance out of their high interest rate loan, this is the time to take advantage of this opportunity.
Bloomberg - Bank of America Corp., the second- largest U.S. home lender, added 2,000 employees since April to work with borrowers having trouble paying their mortgages, a senior executive said.
Popularity: 1%
House Democrats agree to put consumer watchdog agency in Federal Reserve
Financial reform is getting more watered down by the day. Derivatives reform has so many exclusions that is basically doesn’t fix anything. Now this is another sign that we are not going to get real financial reform. Putting a consumer protection agency in the Federal Reserve that has a mandate to promote a positive business environment and full employment means that protecting consumers will take backseat.
Fed had the ability to regulate the banks before and they did nothing to stop the predatory practices that were in place before the crisis ie: subprime loans, credit card and debit cards fees. What makes us think they will properly regulate these issues now when they already have a conflicting dual mandate? If we really want to protect consumers, we need a independent non-partisan agency with regulatory authority to handle these issues with that being their sole mandate. We can not think that the Fed is going to put consumers first over having healthy and profitable banks. Currently they are still paying interest on deposits in the Fed instead of forcing that money into the economy as loans and credit. I am not saying we should force the producing of bad loans but we should force the banks to find good loans and business to deploy that money to rebuild their balance-sheets.
Reuters - In a retreat by the House on one of the most contentious parts of historic Wall Street reform legislation, Representative Barney Frank said the House would go along with the Senate’s plan to make the watchdog a part of the U.S. central bank.
House Democrats negotiating final changes to the legislation will also seek to subject payday lenders, check cashers and private student loan providers to the watchdog’s supervision, said a statement from Frank.
House and Senate negotiators are set to resume talks over the wide-ranging reforms on Tuesday.
Popularity: 1%
ECB must buy ‘hundred of billions’ of bonds to tame Europe’s debt crisis
This situation in the EU is starting to get pretty dire with interest rates on more Euro Zone country bonds rising much higher than the flagship German economy. In the article the European Central Bank said that this purchase operations would be a sterilized program. This means that these operations should not impact the money supply by increasing it.
If you look at how they are going to implement the program, this is flat out not true. They plan on purchasing the bonds outright from investors and governments alike. When you purchase these bonds, they are giving cash or equivalent in exchange. This money can be spent at that point on any number of endeavors. That does not meet the criteria of sterilized. Even if they just create the credits now to purchase those bonds, in the future you are creating inflation when those bonds come due and you either need to pay them off or create even more bonds (debt obligations) and roll over the debt. There is only 3 options with any debt, pay off, default or refinance. All these programs created always fall under one of three of these.
I am very eager to see the EU’s plan to prevent a double-dip recession in July.
Popularity: 1%
FTC moves against mortgage modification and foreclosure relief scams
We should be glad to see the FTC stepping up and doing its job against fraudsters of all kind. Today in other news, the Attorney General’s office is cracking down on companies that have been committing mortgage fraud. We have to persecute any and all wrong doing in this crisis or we will set up the precedent that is it okay to steal and loot the American people at will. The people that are taking these types of programs are already vulnerable because of their financial situation. We have to protect them from being exploited by these types of scams.
Consumer Reports - The Federal Trade Commission announced this week that it is taking legal action against more than a dozen marketers accused of offering bogus mortgage modification or foreclosure relief services. Foreclosure rescue companies that charge high upfront fees for help that never comes were among five financial traps we advised readers to steer clear of in a March 2009 Consumer Reports story describing scams that were flourishing in the wake of the economic meltdown.
Popularity: 1%
Economists consider tearing down homes to protect U.S. housing market
This is a hilarious idea. It follows the classic supply and demand theory. Economists are proposing to tear down houses to reduce the “shadow inventory” that are on the banks books as REO (Real Estate Owned) foreclosures. It is true that if you reduce the supply of housing, that will tend to keep prices stable and then cause them to rise with all things equal.
The problem is that we are butting up again with the same problem I have been writing about for 2 years now. What are are saying is that we want to keep prices artificially higher than they should be. This punishes people who are saving up for a home by forcing them to purchase these homes and in effect paying much more for them through the interest charges that go along with a home mortgage.
Wouldn’t it be a better idea to force this inventory on the market and have that supply bring prices to reflect the current housing situation? Wouldn’t that in effect spur buying in the housing market and then you would see spill-over in all the purchases that go along with buying a new home? We as taxpayers are paying for this crisis so why should the people benefit from this mis-allocation of resources and turn a bad situation into a positive one. The more home-owners you have the more of a community is built and that also helps bring down other problems like crime and brings in revenue to the cities through property taxes. Bottomline this is a laughable idea and will be a quite sad state of affairs if we start carrying this out as a policy. We can be more creative than that….can’t we?
Popularity: 1%