What is next when people begin to mail their keys into Mortgage Companies?

[Blackhatjack]

With Calif report that foreclosure notices are up 67% over last year, and that housing inventory is piling up with few buyers, what is next?

People mail in their keys to the Mortgage Companies as their adjustable rate mortgages go up up up with rising interest rates. These homes become more inventory on the market at depressed prices, dragging down the value of other homes competing for buyers.

Plus what about the drop in fmv of homes where people have borrowed most of their equity in home equity loans? They end up owning a home that is worth less than the loan they are paying off.

This could get ugly real fast, and Calif usually leads the way .....

[LoKnLoD]

1. It's not just Cali

I read last month they were WAY up in Florida, and saw a headline on Raw Story that foreclosures are way up in Connecticut. I think it is a national problem with the adjustable rate mortgages.

[Blackhatjack]

2. Adj Rate Mortgages are going to reset before end of year ...

...and all predictions are that interest rates will continue to rise. Not a one state thing, but a national problem for sure.

[Solo_in_MD]

3. It seems to be a bicoastal thing

in the boom areas. While the experts can make all the predictions they want to, for the individuals caught in it, there is no such thing as a soft landing

[NVMojo]

8. but it is true that California leads the housing trends ...

[MADem]

4. Housing prices, in many (not all) locales are simply INSANE

When a shitbox that cost twenty some odd grand in the seventies is selling for a million or more nowadays, there's some serious correction needed. When "the dream of home ownership" is rotting on the vine because the prices are way too out-of-line, adjustment is overdue.

I always thought Northeast prices were ghastly, but California does indeed lead the way....

[mike_c]

6. only something like 14 percent of people in my NorCal county...

...can afford to buy a median price home here in today's market, and it's only 12 percent in the most populated part of the county.

[skids]

7. Not as insane as it might seem.

They are overpriced, but you also have to take into account inflation.

Try to remember a time when you saw what you considered to be a fair price for a house, then figure out when the last time was when that house was at that price. Then figure out the ratio of the CPI between then and now and use it to increase the "fair price" to today's dollars. That tells you how insane the house price really is. (The CPI tells you how insane inflation is :-) )

So it's partly an overbought market, and partly due to the fact that the federal reserve keeps making money out of nowhere and giving it to banks, resulting in the injection of borrowed "cash" into the economy which doesn't actually exist yet. A buck ain't worth what most people think it's worth anymore.

The thing that really sucks about inflation is that if you do manage to preserve your assets by buying something solid like a house or gold, when you sell it to take the cash back out, you've made a "profit" and have to pay taxes on it. Which is just one of the ways the government can make money off of allowing the dollar to fall.

[NVMojo]

9. a friend who is a property owner/manager explained to me that construction

costs are unusually high right now and alot of it is being blamed on Katrina still. So that makes buying already constructed homes/buildings more expensive but cheaper than new construction in some areas.

[TreasonousBastard]

10. Try this one...

in 1965, my father had died the year before leaving us a fair amount of money, so my mother bought a waterfront summer house on Long Island for $17,000 and ended up selling it a few years later for a fair profit.

At a 6% annual gain, that house would now be worth about $190,000, but it's on the market for just under a million, and that's only because it has been proven that there are plenty of people who have that kind of money and are dumb enough to pay that kind of money.

BTW, I haven't seen one house in this whole township for under $400,000. I bought a handyman special here in 1980 for $32,000, but that barely gets you a storage unit now. There's a cute place for sale around the corner from where I am now-- small enough for me with a large enough yard to do some gardening and let the cats and dogs play. If it was in parts of Pennsylvania I looked at, it would go for a little over a hundred grand tops, which is what it should go for here. It's listed at $459,000

For years there have been just enough people who have been able to scrape up enough money to buy a house, and that's been keeping houses high. It doesn't cost $100,000 to add $100,000 in "value" to a house, so builders have no incentive to build cheap ones if they can sell all the expensive ones they can put up. Add to that speculative buying and flipping and people who shouldn't speculate thinking about leveraging that low down payment into a huge profit if they sell in 3-5 years and prices shoot up.

Seems that there just aren't enough people who can actually afford those prices.

Had to happen eventually.

[lectrobyte]

5. Not just Calif. Here in the boomtown, RTP NC, could that be

the sound of a bubble popping?

http://www.wral.com/news/9144271/detail.html

excerpting a bit:

RALEIGH, N.C. -- In Wake County, an average of 80 homes are foreclosed on each week.

"It's at least 50 percent of an increase in the last five years. Five years ago, there would have been half the foreclosures there are today," said attorney Timothy Peterkin.

In fact, in the past seven years the number of foreclosure filings on homes and businesses has jumped 300 percent statewide. In Wake County, filings have risen 263.5 percent.